Trading on Wall Street was calm after the opening bell in New York ahead of the Federal Reserve’s next decision on interest rates. Meanwhile the FTSE 100 (^FTSE) and European stocks were lower on Wednesday as UK inflation remained above the 2% target.
It came as the Consumer Prices Index (CPI), which tracks cost changes across the economy, came in at 2.2% in the year to August, according to data from the Office for National Statistics (ONS).
Services inflation, which has been closely watched by the Bank of England as it decides whether to cut the Bank rate, rose from 5.2% to 5.6%.
Core CPI, which excludes energy, food, alcohol and tobacco, rose by 3.6% in the 12 months to August 2024, up from 3.3% in July. Economists had expected a smaller rise in core inflation, to 3.5%.
Well that's all folks, thanks for following along. Be sure to join us again tomorrow when we'll be back for more of the latest market news and all that's happening across the global economy.
The US Federal Reserve will be making a decision on interest rates at 7pm this evening so we will be digesting the move and all the reaction tomorrow morning.
We will also hear from the Bank of England at noon so it'll be sure to be a busy one.
Until then... have a good evening!
LaToya Harding
LadBible hails record readership
Moscow, Russia - 1 June 2020: LadBible website with logo , Illustrative Editorial (Postmodern Studio)
The owner of LadBible has brought in a record number of readers, viewers and listeners in the first half of the end, with its content reaching 494 million people.
The Telegraph has the details...
LBG Media, which also owns the UniLad and SportBible brands, said it swung to a profit of £7.1m over the period, up from a £1.2m loss last year, while revenue grew 29pc to £42.3m.
The company said it has built market share in the US, with 141m of its audience members coming from the country.
Solly Solomou, chief executive of LBG Group, said the company is “going from strength to strength” in the US.
Part of that was by buying female-focused digital media group Betches Media for $24m (£18.19 million) last year.
Mr Solomou said:
“In the complex digital media landscape, the detailed understanding we have of our audience and our propensity to be agile in such a dynamic market provide a strong foundation for long-term growth and the delivery of shareholder value.”
LaToya Harding
Microsoft slips after teaming up with BlackRock
Tech giant Microsoft (MSFT) is teaming up with asset manager BlackRock (BLK), as part of a group of companies, to launch a fund worth more than $30bn (£22.7bn) to invest in the development of artificial intelligence (AI) data centres and the energy projects to power them.
Chipmaker Nvidia (NVDA) will also be supporting the initiative by providing its "expertise in AI data centers and AI factories to benefit the AI ecosystem," according to the announcement on Tuesday.
Following an initial $30bn private equity raise, the Global AI Infrastructure Investment Partnership (GAIIP) will seek to use this money to pull together up to $100bn of investments.
Microsoft CEO Satya Nadella said that the GAIIP would "bring together financial and industry leaders to build the infrastructure of the future and power it in a sustainable way".
Shares in Microsoft were up less than 1% in pre-market trading, after ending Tuesday's session in the green.
This comes after the company announced its board had approved a share buyback programme of up to $60bn.
Microsoft also declared a quarterly dividend of $0.83 per share, an increase of 10% on the previous quarter.
LaToya Harding
Investors expect cut to US interest rates today
Investors are expecting a cut to US interest rates later this evening. According to CME’s Fedwatch tool, there’s a 65% chance that the Federal Reserve cuts US interest rates by half a percentage point today.
There is a 35% chance of a smaller, quarter-percentage-point, cut.
In premarket trading ahead of the bell in 15 minutes, the Dow Jones Industrial Average was up a muted 0.1%, the S&P 500 was flat and the Nasdaq 100 was up 0.1%.
The Russell 2000 index, tracking small caps stocks, which tend to fare better in a lower interest-rate environment, were also flat.
LaToya Harding
TGI Fridays owner to file for administration
Undated file photo of a TGI Friday's sign. The UK operator of TGI Fridays has gone into administration as the hospitality firm scrambles to sell its chain of 87 restaurants across the country. Hostmore said it had appointed administrators from Teneo after plans to buy the US restaurant chain collapsed earlier this month. The company is in the process of trying to sell the UK restaurants to new owners, which it hopes to complete by the end of September. Issue date: Wednesday September 18, 2024. (Chris Ison, PA Images)
The UK operator of TGI Fridays has gone into administration as the hospitality firm scrambles to sell its chain of 87 restaurants across the country.
Hostmore said it had appointed administrators from Teneo after plans to buy the US restaurant chain collapsed earlier this month.
The company is in the process of trying to sell the UK restaurants to new owners, which it hopes to complete by the end of September. However, it does not expect to recover enough money to cover its borrowings.
Its sites still remain open.
LaToya Harding
Market moves as midday
Here are the movers this Wednesday...
Legal & General fell after saying it had sold UK house builder CALA Group for £1.35bn to Ferguson Bidco, an entity owned by funds managed by Sixth Street Partners and Patron Capital. The insurer said it would receive cash proceeds of £1.16bn, of which £500m will be paid at closing with the remaining consideration being paid over the next five years.
PZ Cussons tumbled as the Imperial Leather maker said it swung to a full-year pre-tax loss due to the devaluation of the Nigerian naira.
Consumer goods giant Reckitt Benckiser rallied following a Bloomberg report it has launched early discussions with potential suitors for a sale of its homecare assets, which could be worth more than £6bn.
In broker note action, InterContinental Hotels shot to the top of the FTSE 100 after an upgrade to 'buy' at Goldman Sachs, while Premier Inn owner Whitbread was weaker after a downgrade to 'neutral' by the same outfit.
Goldman also upgraded Lancashire Holdings to 'buy' and downgraded Hiscox to 'neutral'.
Hammerson was lifted to 'buy' at Citi and Kainos gained after an upgrade to 'buy' at Deutsche Bank.
LaToya Harding
Countries that have bought and sold the most gold in 2024
Sticking with gold...
These are the countries that bought the most gold between January and June of 2024.
Turkey has been buying the most gold since the beginning of the year, with total purchases exceeding 44.7 tonnes of the precious metal. In July, it bought another 3.8 tonnes.
India has shown the second-highest gold demand in the first half of the year (37.18 tonnes in purchases), followed by China, which has added 28.93 tonnes to its massive gold reserve of 2,264.32 tonnes.
The United States remain the country with the largest gold reserves in the world with 8,133.46 tonnes of the precious metal in its possession. Germany comes second with 3,351.53 tonnes of gold, followed by Italy, France, Russia, and China, each having over 2,000 tonnes of gold in its reserve.
The central bank of the Philippines has sold the most gold within the first six months of the year, roughly 24.95 tonnes or 15.7% of its total gold holdings. Mongolia saw the sharpest decline in its gold reserves; 1.33 tonnes were sold or approximately 22% of its total gold holdings.
LaToya Harding
Gold prices edge higher
Gold (GC=F) prices edged higher in early European trade, remaining close to the all-time highs reached earlier in the week.
Ricardo Evangelista, senior analyst at ActivTrades, said:
“Bullion saw a slight dip in demand during the previous session after stronger-than-expected US retail sales data for August was released.”
“Despite this, the consensus among traders is that the Federal Reserve remains focused on preventing a recession, especially in light of concerns about the labour market.”
“With this in mind, attention is now firmly on today’s Fed rate decision, with a growing number of traders anticipating a 50-basis-point cut. If this scenario materialises, it would likely weaken the dollar, boosting gold prices.”
“The extent of the upside for precious metals will depend on how dovish Jerome Powell’s tone is during his post-announcement address.”
“Should the Fed Chair signal the possibility of further rate cuts later in the year, gold could be poised to reach new record highs.”
LaToya Harding
AI stocks set to bounce higher ahead of Fed cuts rates
SOPA Images, SOPA Images Limited
With the Federal Reserve expected to cut interest rates today for the first time in four years, the AI sector is primed for a significant rally, predicts the CEO of one of the world’s largest independent financial advisory, asset management and fintech organisations.
The bullish prediction from Nigel Green of deVere Group comes as the US central bank’s Federal Open Market Committee is set to announce a rate cut, although analysts are split on whether it be the traditional 25-basis-point rate reduction, or whether the Fed will go for a supersized 50-basis-point cut.
“The AI sector is expected to benefit from the Fed’s shift to monetary easing, opening the door to renewed growth, increased investment, and a surge in innovation.
“Firms developing AI technologies, from machine learning to robotics, rely heavily on capital-intensive research and development (R&D) efforts.
“Lower rates will reduce financial constraints on companies focused on AI, enabling them to double down on innovation and scale up their operations.
“This could drive the next wave of breakthroughs in artificial intelligence, positioning the sector for sustainable long-term growth.”
Nvidia, a prominent player in the AI sector, serves as a bellwether for the industry’s potential resurgence.
LaToya Harding
UK rents soar by 8.4%
Private rents in the UK increased by 8.4% in the 12 months to August, down from 8.6% in the year to July.
Average rent increased to £1,327 (8.5%) in England, £752 (8.5%) in Wales, and £969 (7.6%) in Scotland, in the 12 months to August 2024.
In Northern Ireland, average rents increased by 9.9% in the 12 months to June 2024.
In England, rents inflation was highest in London (9.6%) and lowest in the South West (6.4%), in the 12 months to August 2024.
Aimee North, ONS head of housing market indices said:
"Annual house price growth slowed this month. The North East saw the highest annual growth while London was the only region to show annual price falls.
"Rental prices continue to climb at a near-record rate, although the pace of the increase has slowed slightly. London again saw the fastest growth in rents, with the slowest rise in the South West of England."
LaToya Harding
Eurozone inflation falls to 2.2% after ECB rate cuts
Inflation in the eurozone fell to a three-year low of 2.2% in the year to August, but still remains above the European Central Bank’s (ECB) 2% target despite it cutting interest rates.
The consumer prices index came down from 2.6% in July, Eurostat said on Wednesday, while inflation across the European Union was higher at 2.4%.
The lowest annual rates were registered in Lithuania (0.8%), Latvia (0.9%), Ireland, Slovenia and Finland (all 1.1%).
The highest annual rates were recorded in Romania (5.3%), Belgium (4.3%) and Poland (4.0%). Compared with July 2024, annual inflation fell in twenty Member States, remained stable in one and rose in six.
It comes as the ECB cut interest rates for second time last week to 3.5%.
Average house prices in the UK rose at a slower pace in the year to July, rising by 2.2% to £290,000.
According to the Office for National Statistics (ONS), this was down from 2.7% in the 12 months to June 2024.
The ONS said average house prices increased in England to £306,000 (a rise of 1.6%), in Wales to £218,000 (2.0%), and in Scotland to £199,000 (6.0%) in the last year.
Nick Leeming, chairman of estate agent Jackson-Stops, said:
“For the first time, house prices are reflecting a cautiously positive afterglow from Labour’s election victory and showing a promising picture for the start of autumn.
“Post-election stability coupled with the first base rate cut in four years - which has steadied mortgage rates - have renewed buyers’ intent and underpinned stronger house price growth.”
LaToya Harding
L&G to sell Cala Homes to US private equity giant
Shares in insurance and asset management group Legal & General (LGEN.L) dipped nearly 2% on Wednesday morning following the announcement that it had agreed to sell UK housebuilder Cala Group for £1.35bn to a joint venture run by investment firms Sixth Street Partners and Patron Capital.
L&G said the money from the sale would primarily be used to reinvest in the company but that its board would also consider using it as part of plans to increase returns to shareholders through ongoing share buybacks.
The company said in its half-year results in August that it planned a £200m share buyback this year, followed by similar repurchases in 2025 and 2027.
L&G CEO António Simões said the sale helped the company simplify its "portfolio to enable a sharper focus on our core, synergistic businesses".
"Cala has been an important part of L&G for over a decade, with profits increasing ten-fold since our initial investment in 2013," he added.
L&G shares are down nearly 11% year-to-date, with the company having reported a dip in profits after tax in its half-year results to £223m from £377m for the same period in 2023.
LaToya Harding
What steady inflation means for mortgage holders
ASSOCIATED PRESS
For mortgage holders, steady inflation means their money can stretch a bit further, according to Alice Haine, personal finance expert at Bestinvest.
“For homeowners and first-time buyers, stable inflation combined with slightly more competitive mortgage rates means affordability levels are improving for those shopping around for a new home as their money can stretch that little bit further," she said.
“Those pinning their hopes on a second rate reduction to ease their borrowing woes are likely to take some comfort from the number of major lenders already rolling out mortgage rate cuts. The number of sub 4% fixed rate deals available is on the rise, with some lenders even extending this to two-year fixes, as competition heats up. A surprise interest rate reduction tomorrow could catalyse the mortgage market even further with rates falling at an even faster pace."
LaToya Harding
Odds of UK interest rate cut fall
Today's inflation data comes a day before the Bank of England's Monetary Policy Committee (MPC) makes its next decision on UK interest rates.
Traders are still pricing in two more rate cuts by the end of the year, although by a smaller margin.
Richard Carter, head of fixed interest research at Quilter Cheviot, said the rise in core inflation gives the BoE food for thought.
"Today’s inflation figures for August, which shows CPI has remained at 2.2% will likely bolster predictions that the Bank of England will hold rates as it prepares for its upcoming policy decision this week. The inflation data, which follows July's rate of 2.2% will unlikely cause the BoE to want to diverge from its current plans especially given core inflation rose by 3.6% in the 12 months to August, up from 3.3% in July," he said.
Ruth Gregory, deputy chief UK economist at Capital Economics, said:
"Overall, a pause on interest rate cuts was already expected tomorrow and today’s release cements that view. We continue to assume the next 25 basis point rate interest rate cut will take place in November and that rates will be cut at alternative Bank of England meetings until June."
LaToya Harding
Where are prices rising and falling?
Grant Fitzner, chief economist at the ONS, said:
“Inflation held steady in August as various price fluctuations offset each other.
“The main movements came from air fares, in particular to European destinations, which showed a large monthly rise, following a fall this time last year.
“This was offset by lower prices at the pump as well as falling costs at restaurants and hotels.
“Also, the prices of shop-bought alcohol fell slightly this month, but rose at the same time last year.
“Following two months of growth, raw material prices fell, driven by lower crude oil prices, while the increase in the cost of goods leaving factories slowed again.”
Air fares rose at the second-fastest pace since records began in 2001, in a blow to families during the school summer holidays.
The cost of air travel jumped by 22.2% between July and August, according to the ONS. On the other hand, motor fuel prices fell by 3.4% in the year to August, compared with a rise of 1.8% in the year to July.
According to the ONS, the average price of petrol fell by 2.1p per litre between July and August to 142.3p per litre. That’s down from 148.5p per litre in August 2023.
Diesel prices fell by 2.6p per litre to 147.8p per litre, down from 151.1p per litre in August 2023.
Cheaper oil prices also meant the cost of raw materials was down, which meant the cost of goods leaving factories slowed.
LaToya Harding
UK inflation rate holds steady at 2.2%
Stephen Chung
Inflation remained above the Bank of England’s (BoE) 2% target last month, official figures show, as rate setters prepare to announce the next decision on interest rates.
The Consumer Prices Index (CPI), which tracks cost changes across the economy, rose by 2.2% in the year to August, according to data from the Office for National Statistics.
Core CPI, which excludes energy, food, alcohol and tobacco, rose by 3.6% in the 12 months to August 2024, up from 3.3% in July. Economists had expected a smaller rise in core inflation, to 3.5%.
Services inflation rose by 5.6% in August, in line with economists' expectations, compared to 5.2% in July amid a possible impact from Taylor Swift’s UK tour. This measure is closely watched by the Bank rate setters.
Inflation has now been slightly above the BoE’s 2% target for two consecutive months.
CPI rose by 2.2% in the 12 months to August 2024, unchanged from July 2024.
Stocks in Asia were higher overnight as traders look forward to the possibility of a cut to interest rates from the US Federal Reserve. It would be the first reduction in more than four years.
The Nikkei (^N225) rose 0.5% on the day in Japan and the Shanghai Composite (000001.SS) was 0.5% down by the end of the session. The Hang Seng (^HSI) was closed in Hong Kong for a national holiday.
Wall Street ended almost flat on the day after hitting record highs earlier in the session. The S&P 500 (^GSPC) rose just 0.03%, and the tech-heavy Nasdaq (^IXIC) was 0.2% higher. The Dow Jones (^DJI) also ended 0.04% down.
In the bond market, the yield benchmark 10-year US Treasury notes rose 3.64%, from 3.62 late on Monday.
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's a quick look at what's on the agenda for today:
7am: UK inflation report for August
9.30am: UK house prices and rental costs data
10am: Eurozone inflation report for August final reading
7pm: Federal Reserve sets US interest rates
7.30pm: Federal Reserve press conference
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