Facing four big interest rate decisions in the next 24 hours, traders on Wednesday were holding off on taking out big bets.
Lower inflation readings from both the UK and US have taken some, but by no means all, pressure off the Bank of England and Federal Reserve.
‘We may not be out of the woods yet but there will have been an audible sigh of relief on Threadneedle Street this morning as UK inflation figures followed the trend set in the US on Tuesday and came in below expectations,’ said Russ Mould at AJ Bell.
The FTSE 100 index was down 20.95 points, or 0.3% at 7,481.94. The FTSE 250 was down 73.57 points, or 0.4%, at 19,012.72, and the AIM All-Share was down 1.97 points, or 0.2%, at 836.62.
The Cboe UK 100 was down 0.2% at 748.63, the Cboe UK 250 down 0.4% at 16,410.66, and the Cboe Small Companies down 0.2% at 13,108.38.
Inflation in the UK cooled off in November from October’s record high, according to data from the Office of National Statistics on Wednesday.
The consumer price index rose by 0.4% in November against the previous month. Annually, CPI grew by 10.7%.
Both the annual and the monthly increases undershot FXStreet-cited market consensus of 0.6% and 10.9% rises, respectively.
In October, prices rose by 11.1% against the previous year, the highest annual inflation rate since the National Statistics series began in January 1997.
‘Prices are still seeing double-digit increases and, in some areas, inflationary pressures are proving worryingly sticky - notably food. However, we seem to be past the peak or at least close to that point and this probably confirms there won’t need to be a repeat of November’s record-breaking 75 basis point rise when the Bank of England meets tomorrow,’ AJ Bell’s Mould explained.
The Bank of England will announce its interest rate decision on Thursday at midday. Shortly afterward, the European Central Bank will reveal its own rate decision. The Swiss National Bank will kick off the central bank trifecta on Thursday morning.
Until then, all eyes will be on the US Federal Reserve which is set to announce its interest rate decision at 1900 GMT.
Investors are expecting the policy-setting Federal Open Market Committee to announce a 50 basis point interest rate hike, following a lower-than-expected inflation print for the US on Tuesday.
The US consumer price index rose 7.1% in November from a year before, slowing from the 7.7% annual rise recorded in October. Market consensus, according to FXStreet, had predicted inflation would be 7.3% in November.
Stocks in New York are called lower on Wednesday. The Dow Jones Industrial Average is called down 0.1%, the S&P 500 index down 0.2%, and the Nasdaq Composite down 0.2%.
The pound was quoted at $1.2378 at midday on Wednesday in London, unchanged from late Tuesday. The euro stood at $1.0646, a touch higher against $1.0643. Against the yen, the dollar was trading at JP¥134.94, lower compared to JP¥135.10.
‘The softer than expected US CPI drove the dollar and interest rates lower, while igniting strong advances in equities, risk assets, commodities, and gold,’ commented Bannockburn Global Forex. ‘Calmer market conditions are prevailing today, and we suspect that in the run-up to the FOMC meeting, a broadly consolidative tone will emerge.’
In London, BT was up 2.6% after it signed a five-year deal with Nokia for its AVA analytics software.
Nokia said the software for fixed networks will help the London-based telecommunications company strengthen its network monitoring through artificial intelligence and machine learning and also improve subscriber experience.
Taylor Wimpey fell 1.5% after JPMorgan cut the UK housebuilder to ’neutral’ from ’overweight’.
Rio Tinto also took a hit from a JPMorgan ratings cut, falling 1.9%. The US investment bank cut the Anglo-Australian miner to ’underweight’ from ’neutral’.
In the FTSE 250, Watches of Switzerland dropped 6.8% despite reporting double-digit rises in both interim profit and revenue and boasting ‘ongoing’ market share gains.
In the six months that ended on October 30, the watch retailer reported revenue of £765 million, up 31% from £586 million the previous year. Pretax profit rose 28% to £83 million from £65 million.
Looking ahead, Watches of Switzerland noted that trading in the holiday period so far has been in-line with its expectations. As a result, it kept its full-year guidance unchanged which expects revenue between £1.50 billion and £1.55 billion.
Tui fell 6.2% despite reporting a narrowed annual loss in the year ended September 30, on top of a significant jump in revenue thanks to the lifting of Covid-19 travel restrictions.
However, looking ahead, Tui noted a continuing ‘trend towards a higher share of short-term bookings’, meaning customers are opting to book holidays or travels less in advance in the current inflationary economic environment.
Volution rose 2.1% after it said its revenue was up in the past four months, with all three sales regions experiencing organic growth.
The energy-efficient indoor air-quality product maker said revenue for the four months to November 30 was about £112 million, up 7.7% from £104.0 million a year ago, with organic growth of 5.5%, both at constant currency.
The revenue growth was a result of higher volume and price increases, Volution said.
On AIM, Billington jumped 33% after it said it expects both 2022 and 2023 profit to be ‘significantly’ ahead of the board’s previous expectations.
Billington said that it has a strong order book at improving profit margins and a significant pipeline of opportunities, providing an improved outlook for the second half of 2022 and into 2023.
It now expects adjusted pretax profit for 2022 to be significantly ahead of the board’s expectations, with revenue remaining unchanged. Adjusted pretax profit for 2023 is also expected significantly ahead of expectations.
In 2021, Billington reported pretax profit of £1.3 million and revenue of £82.7 million.
In European equities on Wednesday, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 0.8%.
Industrial production in the eurozone declined by 2.0% in October from September, but still was higher than a year prior, data from Eurostat showed.
The 2.0% decline in seasonally adjusted industrial production in October compared with a month-on-month rise of 0.9% in September. Compared to October of last year, industrial production in the eurozone increased by 3.4%. In September, the annual increase was 4.9%.
Brent oil was quoted at $81.41 a barrel at midday in London on Wednesday, up from $81.03 late Tuesday. Gold was quoted at $1,806.69 an ounce, lower against $1,813.25.
By Heather Rydings, Alliance News senior economics reporter
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