Wall Street pushed higher on Friday, following in the steps of the FTSE 100 (^FTSE) and European stocks as a key measure of US inflation fell slightly more than expected. It comes as a sign that the US Federal Reserve will have room to keep cutting interest rates.
The personal consumption expenditures (PCE) index dropped from 2.5% to 2.2% in August, according to the Commerce Department, which was slightly lower than forecasts of 2.3%. However, the core measure, which excludes volatile items food and energy, ticked up to 2.7% last month.
Meanwhile, Chinese stocks enjoyed their best week since 2008 following a blitz of stimulus measures aimed at improving the faltering economy.
China cut the amount banks must hold in reserve, releasing an estimated £106.6bn in liquidity into the financial market. Chinese markets are now closed for a week-long public holiday.
Mining shares jumped this week as hopes for increased demand from China lifted metal prices, with an index of London-listed industrial miners rising more than 11% this week. Similarly, gains in China-exposed luxury retailers lifted the personal goods index about 12%.
Tin Lu, chief China economist at Nomura, said: "Beijing seems finally determined to roll out its bazooka stimulus in rapid succession… Beijing’s recognition of the severe situation of the economy and lack of success in a piecemeal approach should be valued by markets.
"But eventually it is still necessary for Beijing to introduce well-thought policies to address many of the deep-rooted problems, particularly regarding how to stabilise the property sector, which is now in its fourth year of contraction."
Meanwhile, the Japanese yen fell by 1% to three-week lows amid a leadership contest in the country.
London’s benchmark index was 0.5% higher by the end of the day
Germany's DAX (^GDAXI) rose 1.2% and the CAC (^FCHI) in Paris also headed 0.7% into the green
Well that's all folks, thanks for following along. Be sure to join us again on Monday when we'll be back for more of the latest market news and all things happening across the global economy.
Until then.... have a great weekend!
LaToya Harding
Stocks to watch next week
Just before we head off for the day, and of course the week, here's a quick rundown of what to look forward to when we return after the weekend...
The coming week is set to be busy one in markets for high-street favourites, as a number of household names are set to report earnings.
In the UK, investors will be looking to see if sausage roll maker Greggs can serve up another impressive trading update, having beaten expectations once again in the first-half.
Markets will also be waiting to see if supermarket Tesco is still on track to meet its full-year operating profit expectations.
Pub chain JD Wetherspoon will also reveal whether its full-year results have met expectations and offer guidance for the coming year that matches consensus forecasts.
Sportswear brand Nike will be in focus, as investors look to see how the company is faring ahead its change in CEO in a couple of weeks.
Meanwhile, Wall Street will be watching to see if denim brand Levi's can deliver any improvement on revenues and earnings.
U.S. Federal Reserve Chair Jerome Powell attends a press conference, following a meeting of the Federal Open Markets Committee, in Washington on September 18, 2024.( The Yomiuri Shimbun via AP Images ) (Hiroyuki Tanaka, Associated Press)
The latest data from the Fed's preferred inflation gauge, the personal consumption expenditure (PCE) price index, is showing mixed signals surrounding inflation. On a headline basis, inflation cooled to 2.2% from 2.5%, driven by lower energy costs.
However, core PCE jumped by 0.1% to 2.7%, showing that the inflation battle may not be over quite just yet.
John Choong, head of equities and markets at Investors Edge, said:
"While markets are pricing in a 50bps cut at the November meeting, a deeper dive into the latest PCE data reveals a more nuanced picture. The fall in headline PCE is masking underlying inflationary pressures that remain stubborn, as the huge drop was driven by declining energy costs and goods deflation.
"However, stickier elements of inflation remain stubbornly high, as year-over-year core PCE rose for the first since January 2023. The labour market isn't showing tremendous signs of cooling either. Although personal income did fall, this was down to lower asset receipts and dividends, because wages actually rose from July.
"Meanwhile, consumer spending, while down, was primarily due to decreased motor vehicle purchases, with services spending remaining robust. What's more, election jitters may be tempering some consumer spending, but overall strength persists. As such, looking beyond headline figures, there's little justification for the Fed to rush into another 50bps cut."
LaToya Harding
Amazon's $4bn venture with Anthropic cleared by CMA
Amazon’s $4bn partnership with AI firm Anthropic has been cleared by the UK’s competition regulator.
The Competition and Markets Authority (CMA) said on Friday that the deal does not need further investigation, after carrying out a phase 1 probe into concerns about its impact on competition in the AI sector.
The watchdog has been vocal about its concerns over large tech firms investing heavily in AI start-ups, and earlier this year highlighted a number of what it called an “interconnected web” of more than 90 partnerships and strategic investments between a small handful of the biggest tech and AI firms.
It has since launched a number of investigations into similar partnerships.
An Amazon spokesperson welcomed the regulator’s decision, and said:
"By investing in Anthropic, we’re helping to spur entry and competition in generative AI. Customers are very excited about the opportunities this collaboration is providing them."
LaToya Harding
Key US inflation measure falls faster than expected
A key measure of US inflation has fallen slightly more than expected in a sign that the Federal Reserve will have room to keep cutting interest rates.
The personal consumption expenditures (PCE) index dropped from 2.5% to 2.2% in August, according to the Commerce Department, which was slightly lower than forecasts of 2.3%.
However, the core measure, which excludes volatile items food and energy, ticked up to 2.7% last month.
The PCE price index in the US increased 2.2% year-on-year in August 2024, the lowest since February 2021, compared to 2.5% in July and below forecasts of 2.3%.https://t.co/gTyntlo82Cpic.twitter.com/kqReQcsxSC
File photo dated 26/12/20 of people carrying shopping bags. British retailers saw sales rise last month as summer discounts and warmer weather helped boost clothes stores and supermarkets, according to official estimates. Retail sales volumes, which measure the quantity bought, rose by 1% in August, the Office for National Statistics (ONS) said. Issue date: Friday September 20, 2024. (Andrew Matthews, PA Images)
UK retailers reported the fastest growth in sales since May this month, according to the Confederation of British Industry’s latest survey. They also expect a further improvement in October, the report revealed.
The CBI said its monthly retail sales balance, which deducts retailers who said their sales rose from those reporting a decline, improved to +4% in September from -27% in August. Retailers’ expectations for the month ahead improved to +5% from -17%, and were the strongest since April 2023.
Internet sales volumes bounced back at the fastest rate since June 2023 (+18% from -15% in August).
Meanwhile, online sales are expected to grow at an even faster pace in October (+35%).
However, sales are still likely to remain below normal for the time of year.
Martin Sartorius, the CBI’s principal economist, said:
"After a challenging summer, retailers will welcome the modest growth in annual sales volumes this month. While some firms within the retail sector are beginning to see tailwinds from rising household incomes, others report that consumer spending habits are still being affected by the increase in prices over the last few years.
"In contrast to the recovery seen in the retail sector, wholesalers and motor traders continue to see a decline in sales volumes, with businesses reporting concerns about a slow and uncertain market."
LaToya Harding
How to use your Avios points for more than flight tickets
Avios points are best known for booking flights but their value extends to other perks.
Earned through airlines like British Airways and everyday spending with partner retailers and credit cards, Avios has become a versatile reward system.
From hotel stays and car rentals to shopping and leisure activities, these points can be used in ways that cater to all lifestyles, not just to frequent flyers.
As always, here's a quick look at what's happing in equity markets today...
Prudential was the top gainer on the FTSE 100 as it announced that PT Prudential Sharia Life Assurance has entered into a long-term strategic bancassurance partnership with Bank Syariah Indonesia (BSI). The partnership will see Prudential will become the Syariah life insurance provider of BSI from early 2025 and BSI will market, promote, distribute and/or refer Prudential products to its customers.
Asia-focused Prudential has gained sharply this week, lifted by news of China's various stimulus measures.
Elsewhere, food producer Cranswick rallied after saying it expects annual results to be at the upper end of expectations as first-half trading came in ahead of the previous year.
The company said it was still cautious about "current market and wider economic and geopolitical conditions", but noted that trading since the end of the first quarter "has been stronger than previously expected, underpinned by continued robust volume growth in our core UK food business (and) a positive ongoing contribution from our expanding pig farming operations".
Clinical-stage biotherapeutics company PureTech Health was also up as it said the schizophrenia treatment it developed, which was later sold to Bristol Myers Squibb, has been approved by US regulators, triggering a $29m payment and unlocking potential future royalties.
LaToya Harding
The top gold funds to invest in as prices soar
Gold (GC=F) prices have continued to hit fresh highs this week, amid an escalation in geopolitical tensions and with the US interest rate cutting cycle under way.
The precious metal topped £2,000 per ounce for the first time in the UK on Thursday morning. Paul Atkinson, managing director of Atkinsons Bullion and Coins, attributes this to a "combination of soaring gold price in US dollars", as well as the strength of the pound against the dollar, with the cable rate trading at $1.3381 at midday on Thursday.
Gold is primarily traded in US dollars so falls in the currency can make the precious metal cheaper for buyers.
The gold spot price was trading at an all-time high of nearly $2,677 at midday on Thursday, while gold futures had surged to $2,698. The spot price refers to the current market price of gold, while futures contracts show the agreed price at which the precious metal will be bought and sold in the future.
These latest surges in the gold price come after US consumer confidence data released on Wednesday showed the largest decline in three years, further fuelling market expectations of further interest rate cuts.
There are also concerns around stubborn inflation in the world's major economies. The rate of price growth fell to 2.5% in the US in August, though this was still above the central bank target of 2%.
Panoramic view of exclusive four storey Victorian townhouses in an exclusive area of a UK city called Millionaire's Row with copy space (Clare Jackson)
HMRC property transaction data revealed on Friday that there were 90,210 UK residential transactions in August 2024. This was 5% higher than a year ago but marginally lower (less than 1%) month-on-month.
Nick Leeming, chairman of Jackson-Stops, said:
“A notable 5% rise in transactions this month, compared to a year ago, demonstrates the demand we're witnessing across the housing market.
"This growth is partly driven by greater choice in mortgage products and rising buyer confidence, further supported by last month's interest rate cut by the Bank of England—the first since 2020.
"As transaction data often lags behind real-time sentiment, we expect this positive momentum to carry through for the rest of the year.
“Our own data reflects this trend, with increased buyer interest translating into more applicant registrations across our branches, while we have also seen a steady rise in listings throughout the last quarter as vendors seek to capitalize on current market conditions.
“Looking ahead, all eyes are on the upcoming budget. While potential changes to capital gains and inheritance tax may temporarily affect demand, we don’t expect it to dampen activity in the final quarter of the year.”
LaToya Harding
Oil prices slip
Oil prices are down on Friday, with Brent crude (BZ=F) slipping by 0.2% to $70.94 per barrel, while the US West Texas Intermediate (CL=F) lost 0.3% to $67.50 at the time of writing.
Both benchmarks are poised for weekly declines, as the market grapples with increased output expectations from Libya and OPEC+ against new stimulus measures from China.
Brent crude has shed approximately 3.7% this week, while WTI is set for a steeper drop of nearly 5.7%, reflecting the market's focus on supply-side pressures. "Oil markets are paying more attention to Libya and OPEC this week, despite China's stimulus efforts," said Priyanka Sachdeva, senior market analyst at Phillip Nova.
OPEC+’s recent decision to raise production has added to the bearish sentiment in a market already struggling with weakening demand. However, China’s central bank moved to inject liquidity and lower interest rates in a bid to boost growth towards the government's 5% target for 2023. Further fiscal measures are expected ahead of China's National Day on 1 October, though uncertainty remains over whether these actions will significantly increase fuel demand.
LaToya Harding
German unemployment rate rises
The unemployment rate rose more than expected in Germany this month, with the seasonally adjusted number of unemployed people increasing by 17,000 to 2.82 million. Economists had expected the figure to rise by 12,000.
Without the adjustment, unemployment fell by 65,600, the latest data revealed.
Carsten Brzeski, global head of macro at ING, said:
"Looking ahead, the gradual weakening of the labour market looks set to continue. Recruitment plans in both industry and services have already fallen to the lowest level in a year. Also, the number of vacancies is gradually coming down…
"Let’s not forget that the labour market is always a lagging and not a leading indicator. For the European Central Bank, today’s German labour market data ends a week which has brought a rate cut at the October meeting back on the table."
LaToya Harding
Travelodge owner strikes £351m deal to buy Abrdn Property Holdings
Maidstone, Kent, England, UK. Travelodge hotel (PjrTravel)
Abrdn Property Income Trust (API) has agreed to sell the vast majority of its portfolio to Travelodge owner GoldenTree Asset Management in a £351m.
The London-listed trust told shareholders on Friday morning that US investment giant GoldenTree will buy its Abrdn Property Holdings subsidiary.
The operation covers 39 properties, covering the property trust’s entire portfolio except for land at Far Ralia in the Cairngorms.
GoldenTree has paid a cash deposit of £35.1m and will pay the remainder once the takeover is completed.
It came after Custodian Property Income REIT’s bid to take over API collapsed earlier this year.
Custodian’s offer, which would have seen API shareholders receive 0.78 Custodian shares for each API share, failed to secure the necessary 75% approval rate needed at a vote in March.
Following the failed deal, shareholders voted in May to approve changes in order to allow the trust to be wound down and sell off its assets.
LaToya Harding
US personal consumption expenditures in focus
Investors are awaiting the US personal consumption expenditures (PCE) price index today.
This is the Federal Reserve’s preferred measure of inflation, which could indicate how steeply the US will cut interest rates.
Derren Nathan, head of equity research at Hargreaves Lansdown, said:
"US inflation figures will also be closely scrutinised. Core personal consumption expenditure (PCE) is expected to have risen between 0.1% and 0.2% last month. Any significant rise above that range could dampen the prospects of further rate cuts by the Fed whose current forecast suggests another half point reduction by the end of 2024."
The US PCE figures for August are due at 1.30pm.
LaToya Harding
Merger and acquisition activity surges
The UK is the third most targeted country for merger and acquisition (M&A) activity this year, LSEG Deals Intelligence revealed.
UK bids totalled $137.1bn (£102.4bn) during the period, 54% more than the value recorded in the first nine months of last year.
Foreign buyers accounted for 72% of these deals, the highest share in three years after a 79% surge in inbound activity.
Deals involving UK targets accounted for 6% of the global M&A total, up from 4% last year and only behind the United States and China.
Lucille Jones, senior manager at LSEG Deals Intelligence, said the removal of UK political uncertainty appears to have brought clarity and confidence to boardrooms.
“This, coupled with the expectation of a further rate cut before the end of the year, bodes well for dealmaker appetites, and may encourage more companies off the sidelines to pursue acquisitions.”
The value of UK outbound M&A increased 15% from the third quarter of 2023 to $52.1bn (£38.9bn) so far during 2024.
LaToya Harding
Inflation slows in France and Spain
FILE - Barges cruise on the Seine River near the Eiffel Tower during a rehearsal for the 2024 Paris Olympic opening ceremony, June. 17, 2024, in Paris. (AP Photo/Thomas Padilla, File) (Thomas Padilla, Associated Press)
Inflation in France and Spain has slowed, the countries' national statistics offices said on Friday.
According to Insee, the annual inflation rate in France fell to 1.2% in September (from 1.8% in August) led by a decline in energy costs. It was lower than market expectations of 1.6%.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said:
"Inflation in France crashed in September, and if these data are representative of what happened in the EZ as a whole—which is not certain—ECB doves will be in a very strong position to push through a third rate cut next month.
"We have long made the point that if eurozone core goods inflation failed to rebound in September, in line with our and the ECB’s new forecasts, an October cut would become the baseline.
"This now seems to be case, which is clearly reflected in market pricing, now pointing to a 75% probability of a rate cut next month.
"We will nail our colours to the mast on a forecast once we see the eurozone inflation numbers on Tuesday, but overall, an October cut now looks much more likely.
Meanwhile, inflation in Spain dropped from 2.4% to 1.7% in August, lower than the 1.9% forecast by analysts. Falling fuel prices were the main factor, while food and electricity costs also aided the decline.
Eurozone government bond yields fell after the figures were released, with Germany’s 10-year bond yield dipping to 2.1%.
Markets are now pricing in a chance of more than 70% that the European Central Bank (ECB) will cut interest rates by a quarter point next month.
This is up from 20% earlier this week.
🇫🇷 Big downside surprise in French inflation, with headline CPI down to 1.2% in September. Crucially, services inflation eased as well, to 2.5%. If we get similar surprises across euro area countries the ECB will have all it needs to cut in October. pic.twitter.com/GrArh0Kv0n
Commentary: China stocks enjoy best week since 2008
After today, Chinese markets will be closed for a week-long public holiday but here's some commentary on all the movement in Asia...
Richard Hunter, head of markets at Interactive Investor, said:
“There will of course be a time lag between the announcement of the stimulus package and its effects washing through to the economy, but the very fact that the authorities have moved away from their previous inertia has energised both domestic and international markets alike.”
Tin Lu, chief China economist at Nomura, said:
"Beijing seems finally determined to roll out its bazooka stimulus in rapid succession… Beijing’s recognition of the severe situation of the economy and lack of success in a piecemeal approach should be valued by markets.
"But eventually it is still necessary for Beijing to introduce well-thought policies to address many of the deep-rooted problems, particularly regarding how to stabilise the property sector, which is now in its fourth year of contraction."
Barclays analysts said:
“At face value, all measures announced this week signal that the urgency of policy response is not lost on authorities – an important shift in a market that was looking for more than just the bare minimum.
“But in a scenario that would have more far-reaching effects on global assets, perhaps this week signals that China is looking to repair its national balance sheet structurally.”
LaToya Harding
Asia and US stocks
Stocks in Asia extended their gains on Friday as risk appetite across financial markets received a further boost from China’s latest stimulus measures, as well as upbeat US momentum.
The Nikkei (^N225) rose 2.3% on the day in Japan, while the Hang Seng (^HSI) jumped 3.1% in Hong Kong. The Shanghai Composite (000001.SS) was 2.9% up by the end of the session.
China stocks enjoyed their best week this week since 2008 as the People’s Bank of China cut the amount banks must hold in reserve, releasing an estimated $142.6bn (£106.6bn) in liquidity into the financial market. It comes as leaders embark on one of their biggest drives in years to kickstart growth.
The bank also cut the seven-day reverse repo rate, the short-term interest paid by the central bank on loans from commercial lenders, from 1.7% to 1.5%.
Overnight, the Shanghai Stock Exchange encountered glitches that hindered order processing and caused delays after the market opened on Friday. This led to a 6.4% increase in the Shenzhen index (399001.SZ), as local media reported that investors flocked to that smaller market during the delay. Trading returned to normal by noon.
The Japanese yen fell by 1% to three-week lows as the ruling Liberal Democratic Party conducted a leadership election that will determine who is Japan’s next prime minister. The change in leadership is not expected to lead to any major policy shifts, given the similarities between the leading contenders.
On Wall Street, the S&P 500 (^GSPC) scored a record closing high, up 0.4% to 5,745.37. The blue-chip Dow Jones (^DJI) rose 0.6% to finish at 42,175.11. The Nasdaq Composite (^IXIC) advanced 0.6%, to 18,190.29.
The yield on 10-year US Treasury notes, which influence investment decisions around the globe, rose to 3.80% yesterday evening from 3.79% late on Wednesday.
LaToya Harding
Coming up...
Good morning, and welcome back to our markets live blog. As usual we will be taking a deep dive into what's moving markets and happening across the global economy.
Here a quick look at what's on the agenda for today...
7.45am: France inflation for September
8.55am: Germany unemployment for September
10am: Eurozone consumer sentiment final for September
11am: UK CBI Retail sales for September
1.30pm: US Spending for August with PCE price index
3pm: US Michigan consumer sentiment final for September
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