Spanish inflation almost halves and German CPI falls as energy prices cool – as it happened

Closing summary

World Bank chief calls for dramatic hike in funding to help developing world

Larry Elliott

Britain’s FTSE 100 index has posted its fourth daily gain in a row, as fears of a banking crisis continue to recede.

The blue-chip share index has closed 56 points higher at 7620 points, up 0.75% today.

Online grocery business Ocado led the risers, jumping 10%, as technology stocks rallied, followed by commercial property group Land Securities (+4.5%) and retailer JD Sports (+4.2%).

European markets also held their gains, with Spain’s IBEX jumping 1.6% and Germany’s DAX up 1.3%.

Michael Hewson of CMC Markets explains:

Ocado has continued to make gains and has risen sharply for the 2^nd day in a row. The gains of the last two days have come despite the shares finishing lower on the day that they published their Q1 numbers. At the time there was a sense that the fall seemed overdone given the weakness we’d already seen since January, begging the question as to whether a lot of the bad news was already in the price. The reaction of the last two days would appear to suggest that there is a degree of that, hence the gains seen in the last couple of days.

The commercial real estate sector has continued its rebound from yesterday, led by British Land and Land Securities in London and Vonovia in Germany.

Swedish retailer H&M is seeing some strong gains today after surprising the markets with a return to profit in Q1. Operating profits came in at SKr725m on sales of Skr54.87bn. Gross margins also came in better than expected at 47.2%.This appears to be giving a lift to the likes of JD Sports, Frasers Group and Next.

Inflation has prompted South Africa’s central bank to raise interest rates by more than expected today.

The South African Reserve Bank announced its ninth interest rate rise in a row, lifting its key lending rate to 7.75% from 7.25%.

Economists had expected a smaller, quarter-point rise.

The move comes after South Africa’s inflation rate rose to 7.0% in the year to February, up from 6.9% in January.

The rolling power cuts that hit South Africa this year have hit its economy, forcing offices, hospitals, factories and tens of thousands of small businesses to close, hitting food supply chains.

Shares in power company Drax have shaken off their earlier losses, after the company told the City it had been invited to enter formal bilateral discussions with the government about its bioenergy with carbon capture and storage project (BECCS).

Drax’s shares are now up 6.5% in late trading, having been down up to 10% this morning, after the company missed out on fast-track financing as part of the UK’s net-zero energy drive.

But Drax says this isn’t the end of the story, and that its Power Station BECCS project has passed the deliverability assessment for the Power BECCS project submission process.

Drax explains:

Drax has been invited to enter formal bilateral discussions with the Government immediately, to move the project forward and ensure the Government is able to fulfil its restated commitment to achieving 5Mtpa of engineered Greenhouse Gas Removals (GGRs) by 2030.

Drax believes that BECCS at Drax Power Station is the only project that can enable the Government to achieve this goal.

The Government has also committed to publish its biomass strategy by the end of June 2023 which will set out how the technology could be deployed.

Reader Ruth Schewietzek has got in touch from Germany about the cost of living squeeze there, following today’s inflation report:

My electricity bill will go down, here in Germany, I already received a letter about that, yet I don’t know how much.

I am now paying 58 euros per month for electricity. Last year I paid 43 euros per month. The bill went up last winter. My suppliers are the municipal suppliers, not a private company.

But in the UK, people face rising costs from the start of April, even though Jeremy Hunt has frozen the Energy Price Guarantee until the end of June.

As John Kerswill points out, the £400 discount paid to households over the last six months will end.

John explains:

For me, loss of the £67 government support grant will see my monthly bill rise by 43%, based on winter use (higher % Inc on summer use).

[ending the EPG shouldn’t directly affect the UK inflation rate, though, as the money was classed as income rather than a cut to prices. But it will leave consumers with less to spend]

Just to clarify one point raised by Tim V, most of the inflation numbers we’ve been quoting today have been another annual price changes, rather than monthly (although i’ve tried to quote both).

Another reader has responded to my point about Spain’s government cutting food prices by lowering the VAT rate – reporting that prices have still risen.

In Spain the government tried to cushion raising prices but supermarkets raised them, prices on essential items are sky high.

Pound at two-month high

Stocks have opened higher on Wall Street, as markets are cheered by signs that inflation is easing and that the banking crisis has calmed down.

The Dow Jones industrial average has risen by 151 points, or 0.46%, to 32,869 points in early trading, with the broader S&P 500 index up 0.65%.

The tech-focused Nasdaq 100 index has gained 0.7%, a day after entering a bull market.

Yesterday it finished trading up more than 20% from its December 28 closing low, helped by rallies in major US teck stocks.

Facebook-owner Meta, for example, has rallied by 70% so far this year, with Apple up 29% in 2023 and Amazon up 18%.

Today’s US economic data shows that inflation still needs to be tamed, says Ryan Brandham, head of global capital markets for North America at Validus Risk Management.

These numbers are fairly in line with expectations, and the Fed will likely breathe a small sigh of relief on the uptick in jobless claims from the last few weeks.

At the margin, this will take some pressure off, but the strong GDP growth means inflation still needs to be tamed”.

US Q4 growth rate trimmed

US jobless claims rise

On a monthly basis, the German consumer price index rose by 0.8% in March alone.

On an EU-harmonised basis (to make comparisons across the Europe earlier) prices jumped by 1.1% this month.

German inflation also dropped this month on an EU-harmonised basis, but again by less than forecast.

Annualised harmonised inflation dropped to 7.8% in March, from 9.3%, but ahead of forecasts of a larger fall to 7.5%, as falling energy prices helped the cost of living squeeze to ease.

German inflation rate drops

This morning’s hopes of green shoots in the UK economy may have suffered a nasty frost.

Allianz Research has predicted that the UK economy will suffer a recession this year, with growth of -0.3% over the whole of 2023.

The US, Germany and Italy are also seen falling into recession this year, with Allianz sticking with its call for “a sizeable recession in the US at the end of the year” due to a slowdown in housing, manufacturing and construction.

The eurozone should avoid a recession in 2023, though, with growth of 0.3% expected.

UK inflation is forecast to average 6.5% this year, and 3.4% in 2024.

That’s higher than in the eurozone, where prices are seen as rising by 5.6% this year, and 2.6% in 2024.

High inflation means central banks remain “ever more caught between a rock and a hard place”, Allianz warns in its latest economic outlook.

It adds:

Financial stability concerns could complicate the already difficult tradeoff between managing sticky core inflation and maintaining growth in setting policy rates over the next few months.