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Stocks tumble on inflation disappointment, US set for mixed open

Published 22/05/2024, 14:43
© Reuters.  FTSE 100 live: Stocks tumble on inflation disappointment, US set for mixed open

Proactive Investors -

  • FTSE 100 falls 39 to 8377
  • UK CPI inflation softened to 2.3% last month
  • M&S profits beat forecasts after rising to decade high

Global markets mostly in red

London's and other major European stock indices remain in the red, while futures markets indicate a mostly lower US open in just over half an hour.

The FTSE 100 is currently around its lowest point of the day, down 56 points at just over 8360, a 0.66% decline so far today, while mid-cap sibling FTSE 250 is down 0.41% at just under 20,700.

In Frankfurt and Milan the DAX and FTSE MIB are down around 0.32%, while in Paris the CAC-40 is down 0.73%. The IBEX 35 is down 0.16% in Madrid, while the wider Euro Stoxx 600 is 0.48% lower.

Earlier Asian markets mostly fell, though the Shanghai Composite was flat and India's Sensex rose 0.36%.

Pound gives up some gains

The pound has given back a significant proportion of the gains against the dollar made on the back of the not-as-good-as-expected inflation data this morning and Rabobank forex analyst Jane Foley says it should continue its "slow grind higher" unless there are any big political shocks in coming months.

While PM Rishi Sunak claimed the CPI data provides “proof that (his government’s) plan is working and that the difficult decisions we have taken are paying off", there is enough stickiness in the underlying figures breakdown to have pushed back market expectations regarding the timing of BoE rate cuts.

Foley says Rabobank still retains a preference for a first BoE rate cut in August, which is likely to come after an expected ECB cut in June and ahead of the US Fed, which her team is forecasting for September.

"Despite the difference in the timing of the first policy moves, we see scope that both the ECB and the BoE will have announced the same amount of rate cuts by year end."

GBP/USD is currently up 0.1% at 1.2722, while against the euro the pound is up 0.3%.

Rabobank is maintaining a six-to-12 month forecast of EUR/GBP at £0.64 based on the view that "a more stable UK political landscape will allow GBP to continue the slow, grinding recovery that has been in evidence since the start of 2023".

"The market’s obsession with the timing of central bank initial policy moves suggests that the releases of the UK labour data on June 11 and the May CPI inflation data on June 19 are likely to be closely watched," said Foley.

"Despite the fact that the UK is facing an election, most likely by year-end, the 20 pt lead in the polls that has been held by the Labour party for some time suggests limited room for surprises... Assuming that the UK political backdrop remains calm, we expect that GBP can continue its slow grind higher medium-term."

Wall Street to open lower

US stocks are heading mostly lower at the open, according to futures markets.

Dow Jones futures are down 0.17% and those for the S&P 500 are 0.13% lower.

Nasdaq futures are just above flat, up 0.03%.

Some big US retailers are repotting today, with closely-watched NVIDIA Corp (NASDAQ:NVDA) earnings coming after the closing bell.

Shares in Target Corp (NYSE:TGT) are down 7% in premarket trading after the chain's first-quarter revenue declines 3.1% and earnings per share came in at $2.03 versus the consensus of $2.06, a first profit miss in six quarters.

Elsewhere in retail, Lululemon Athletica (NASDAQ:LULU) Inc is down 4% premarket after the company said its chief product officer is leaving.

Most of the 'Magnificent Seven' tech giants are modestly in the red, premarket, apart from Tesla Inc (NASDAQ:TSLA), which is down 2.2%.

Election in second half of 2024, says PM

PM Rishi Sunak has just confirmed that the UK general election will be held in the second half of this year.

This was his response when asked if there would be a vote this summer.

Many are saying July is looking likely.

Energy stories

Energy prices should fall further over the coming months, experts say, after UK CPI fell last month largely due to falling gas and electricity prices.

Analysts at Cornwall Insight expect Ofgem to cut the cap even further when the regulator announces the latest price for July this Friday.

Elsewhere in the energy sector, the UK is getting another new nuclear power station.

A former power plant site in Anglesey has been selected for the site, with talks now set to start with potential developers and operators.

The Wylfa plant, of a similar size to Hinkley in Somerset and Sizewell in Suffolk, could provide enough clean power for six million homes for 60 years, said the Department of Energy.

UK gets first physical crypto ETFs

The UK financial watchdog has given the green light for the UK's first 'physically backed' bitcoin and ethereum exchange-traded funds.

WisdomTree has received approval from the Financial Conduct Authority to list its two exchange-traded products on the London Stock Exchange.

Alexis Marinof, head of Europe at WisdomTree, said while UK-based professional investors are already able to allocate to crypto ETPs via German, Swiss, Paris and Amsterdam exchanges, the UKL launches will provide "a more convenient access point".

"FCA approval in this respect could result in greater institutional adoption of the asset class, as many professional investors have been unable to gain exposure to Bitcoin and other cryptocurrencies due to regulatory limitations and uncertainty – we would expect FCA approval of our crypto ETPs’ prospectus to remove those barriers to entry," he said.

Read more on Proactive Investors UK


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