• FTSE 100 closes 39 points higher
• March US inflation falls to 5% vs. 5.1% forecast
• Dow Jones holds gains, but Nasdaq Composite eases

4.45pm: FTSE steady at the close

By the closing bell, the UK’s blue-chip index had gained 0.5% on the day to settle at 7,825 points.

Across the pond, stocks initially benefitted from softer-than-expected US March inflation data but then gave back their gains as core inflation remains stubbornly high, according to Axel Rudolph, senior market analyst at IG.

“Stock markets rallied on Wednesday, with several European indices such as the DAX 40 briefly trading in 1 1/4 year highs and the CAC 40 in all-time record highs ahead of the US March CPI release which came in lower than expected at 0.1% month-on-month and 5% year-on-year (YOY),” Rudolph wrote. 

“US indices also rallied straight after the inflation report but rapidly gave back all of their gains as core inflation, excluding food and energy, came in as expected at 5.6% YOY versus 5.5% in February. They then made back some of their earlier gains ahead of the release of the FOMC minutes for the March meeting.”

3.55pm: Uncertainty remains

The FTSE 100 headed into the final half-hour of trading in London still back above the 7,800 level but below the day’s best levels as US stocks turned mixed, with the Nasdaq Composite slipping lower and the other main indexes paring their gains after the latest US inflation data.

Laith Khalaf, head of investment analysis at AJ Bell, commented: “US inflation has cooled to 5%, which suggests the cure of higher interest rates is working. But core inflation remains stubbornly elevated, and that will continue to cause concern at the Federal Reserve, even if they choose to pause their rate-hiking activities.”

He said: “The turmoil in the banking sector has been a gamechanger, with tightening credit conditions expected to do a lot of the heavy lifting when it comes to cooling the US economy. That relieves pressure on the central bank to push rates up further.

“With inflation falling and some froth blown off the labour market too, it’s little wonder that markets are starting to turn their attention to when rates might start to be cut.

“Current market pricing suggests that US rates will be 0.5% lower by the end of the year. This is a significant shift in expectations, and signals a sea change in monetary policy might be approaching.”

3.35pm: Student digs

Unite Group PLC shares were up 1.4% to 977.50p in afternoon trading after the FTSE 100-listed student accommodation provider said it had already sold 90% of its rooms for the 2023/24 academic year, reflecting strong demand as well as new nomination agreements with universities.

In an update on current trading and quarterly property valuations for the Unite UK Student Accommodation Fund and the London Student Accommodation Joint Venture, Richard Smith, Unite Students’ chief executive officer, commented: “Reservations are significantly ahead of recent sales cycles, reflecting strong demand from both new and existing students as well as new nomination agreements with universities. This progress reinforces our confidence in delivering rental growth of 6-7% for the 2023/24 academic year. Rental growth also continues to support our property valuations as the market adjusts to a higher funding cost environment.”

He added: “The supply of purpose-built student accommodation cannot keep pace with growing student demand at the same time as HMO landlords are leaving the sector. We are therefore tracking a number of new development opportunities at attractive returns, which we are uniquely positioned to deliver through our university relationships and development capability. “

3.20pm: ESG seeding

Seed Capital Solutions PLC, a company formed for the purpose of acquiring a business or businesses operating in market sectors that can display strong ESG credentials, saw dealings commence in its ordinary shares on the Main Market of the London Stock Exchange today, with the stock priced at 0.88p in late afternoon trading.

On admission, the company had a total of 185,406,000 shares of nominal value £0.0025 each with voting rights in issue.

In its admission statement, Seed Capital chairman Damion Greef commented: “As one of the last businesses to list on the standard market under the old LSE rules, our team are excited to finally bring Seed Capital to market to invest into businesses operating in market sectors that can display strong ESG credentials.”

He added: “The importance of sustainable ESG operating practices are now front and centre in the operating manuals for every business and industry sector. The market opportunities are huge; with a projected compound annual growth rate (CAGR) of 12.9%, ESG-focused institutional investment is expected to grow by 84% to US$33.9tn by 2026, making up 21.5% of all assets under management.

“Seed Capital fully intends to participate in this growth opportunity by investing into businesses operating in market sectors that can display strong ESG credentials. I look forward to reporting back to you as our investment programme develops.”

2.55pm: Inflation boost

The FTSE 100 held firm as US stocks opened higher but were fairly volatile following a modestly cooler-than-expected US inflation report for March.

Around 25 minutes after the New York market open, the Dow Jones Industrials Average was up 188 points or 0.6% at 33,873, while the broader S&P 500 index added 0.2%, and the Nasdaq Composite was up 0.1%.

While March’s CPI report showed improvement, inflation remains far higher than the Federal Reserve’s target of 2% leaving investors to speculate over the central bank’s next move in terms of interest rate hikes.

Heading into the report, the market was pricing in a 70% probability of a 25 basis point rate hike in May. However, this had fallen slightly to 65% after the data was released, noted FOREX.com market analyst Fiona Cincotta.

“The market is increasingly confident that the Fed will be cutting interest rates aggressively by the end of the year,” Cincotta said.

“As a result, stocks are rising, led higher by the Nasdaq as high-growth tech stocks have the most to benefit from lower interest rates.”

2.30pm: Banking on Bailey 

Bank of England Governor Andrew Bailey has said bank reforms enacted after the global financial crisis of 2007-09 worked during the recent banking turmoil, but there were questions about whether banks should set aside bigger cash buffers in future, according to a Reuters report.

In a speech on Wednesday to the Institute of International Finance in Washington, where he is attending International Monetary Fund meetings, Bailey said: “Today I do not believe we face a systemic banking crisis. When I look at the UK banks, they are well capitalised, liquid and able to serve their customers and support the economy.”

Bailey, however, echoed calls from his predecessor Mark Carney by saying there might be questions over the size of liquidity buffers required of banks in order to tide them over short-term shocks.

“We can’t assume that, going forwards, the current answer on the total size of liquidity protection is the correct one,” he said. “We saw with Silicon Valley Bank that with the technology we have today – both in terms of communication and speed of access to bank account – runs can go further much more quickly. This must beg the question of what are appropriate and desired liquidity buffers that create the time needed to take action to solve the problem.”

Bailey said future size and make-up of banks’ liquidity buffers would influence how far central banks go in reducing the size of the bond holdings they have acquired since the financial crisis and which grew further during the coronavirus pandemic, Reuters noted.

2.10pm: Risk in Fed overtightening

The FTSE 100 held firm and US stock indexes extended their gains after headline inflation in the US came in at an annual 5.0% in March, below the consensus forecast for 5.1%, and marked another fall back in inflation from 6.0% in February.

Daniel Casali, chief investment strategist at wealth manager Evelyn Partners noted that the annual headline inflation rate has now receded for nine consecutive: “Base effects, where inflation rose sharply on a monthly basis in the first half of 2022, should continue to drag on the annual rate, at least up until June. Critically, lead indicators such as falling job openings and lower selling prices from the National Federation of Independent Business small business survey, indicates that core CPI inflation is set to slow over the coming months.”

He said: “The risk for the Fed now is that it overtightens policy and this leads to a financial crunch in the banking sector, which could in retrospect at least, make the failure of Silicon Valley Bank and Signature Bank last month the canary in the coalmine. Although there are still pockets of inflation in the economy, the Fed Funds rate is now higher than Fed forecasts of underlying inflation, and this positive real interest rate indicates that policy is already restrictive.

“However, the Fed will be aware that there are inflation drivers that are outside of its control, particularly energy prices. OPEC’s recent production cut has given a boost to crude oil prices and complicates the job of the Fed to bring down inflation. So, despite the hawkish rhetoric from FOMC members, the Fed may be reluctant to raise rates too far.”

1.45pm: Fed to ease off hiking

More on today’s US inflation figures, and Naeem Aslam, chief investment officer at Zaye Capital Markets believes the time has come for the Fed to ease off increasing the interest rates.

“Moving ahead, we are going to hear a lot of commotion about the Fed’s next move, and odds are that the Fed will confess that inflation has slowed and that they may halt their hike cycle.”

Gold prices shot up drastically, gaining US$5.39 since the announcement, or 0.25%, with the precious metal now worth US$2,027 per ounce.

Prices have risen as spectators predict a much weak dollar in anticipation the Fed will stop raising rates.

FTSE 100 had initially reacted positively, shooting up 20 points immediately after the data was released, before retreating 10 points.

London’s blue-chip index is currently up 59 points, or 0.76%.

1.35pm: Inflation falls in the US

The US inflation rate year-on-year was 5% in March, down from 6% the previous month and below the consensus of 5.2%.

Core inflation came in at 5.6%, ahead of the forecast of 5.5% and slightly ahead of the 5.5% reported last month.  

FTSE 100 reacted positively to the news, shooting up sharply by roughly 20 points to 7,856, and up 70 points since the market opened.

12.55pm: A quick look at some of London’s movers

Risers

Technology Minerals – up 20% to 2.41p: Shares bounced after it told investors that its part-owned battery recycling business, Recyclus Group, has now received the final approval draft from the Environment Agency (EA) for its proposed lithium-ion plant in Wolverhampton, West Midlands. The group has subsequently responded to the EA to confirm its acceptance of the draft permit and expects the official EA certification to be completed imminently,

Invinity Energy – up 12% to 38.1p: Shares were boosted after the manufacturer of ‘utility-grade’ energy storage systems landed an £11mln grant from the UK Department for Energy Security and Net Zero, under the ‘LODES’ (Longer Duration Energy Storage Demonstration) scheme.

Renalytix – up 13% to 98.7p: Renalytix jumped in London after announcing that data supportive of KidneyIntelX in minorities and veterans is to be presented at the National Kidney Foundation Spring Clinical Meeting. The clinical data shows the importance of using KidneyIntelX bioprognosis in early-stage kidney disease and diabetes patients to blunt the effects of health inequity,

Fallers

De La Rue – down 23% to 38p: Shares plunged after it warned that falling demand for bank notes means adjusted operating profit for the financial year 2023 is expected to be below market expectations.

Petrofac – down 17% to 59p: Shares fell after warning of a widened EBIT loss after reviewing project costs and the timing of recognition of certain revenue streams. As a result, the energy services company will now recognise an additional EBIT reduction of US$140mln to US$160mln in 2022.

12.31pm: US preview

Wall Street is likely to open cautiously higher as investors await the release of March’s Consumer Price Index (CPI), due before the market opens, which will help guide the Federal Reserve’s next interest rate decision.

Futures for the Dow Jones Industrial Average rose 0.24% in Wednesday’s pre-market trading while those for the broader S&P 500 index gained 0.2% and contracts for the Nasdaq-100 added 0.1%.

Ahead of the inflation report, US stocks struggled to find direction on Tuesday, with the DJIA closing 0.3% higher at 33,685, while the S&P 500 ended flat at 4,109 and the Nasdaq Composite fell 0.4% to 12,032.

“More cyclical stocks such as industrials and materials held up well overall, with some weakness in what has been a burgeoning tech sector this year taking some shine from some early trading session strength,” commented Richard Hunter, head of markets at interactive investor.

“The week now gets into full swing with the release of the Consumer Price Index later today. Estimates vary on the outcome of a release which will give the Federal Reserve further food for thought.”

Hunter noted that the general expectation is that the CPI will have increased by 0.2% in March, as compared to a gain of 0.4% in February, but the core inflation number – which excludes energy and food prices – is estimated to have risen by 0.4%, and by 5.6% year-on-year.

“Indeed, while it is clear that there is some cooling of the headline inflation number, attention is likely to turn to some of the underlying measures which have so far proved more difficult to budge, such as clothing, insurance and furnishings in addition to volatile energy and food levels,” he added.

“With this in mind, the consensus remains that victory in the fight against inflation has not yet been achieved and that the Fed will hike rates by a further 0.25% in May, especially given the recent spike in the oil price and little more than a moderate labour market slowdown.”

12.12pm: London still going strong

Ahead of US data set to be released later this afternoon, London’s blue-chip index was up 47 points, or 0.61%, to 7,833.

Centrica, DCC and BT were leading the way as the top risers, up 1.9%, 1.85% and 1.79% respectively.

11.49am: Iron ore rebounds

Iron ore has bounced off three-month lows, with 63.5% of iron ore content for delivery in Tianjin above US$121 per tonne.

Economic data provided some optimism after reports that raised concerns over China’s economic reopening failed to pick up traction and confidence in construction demand grew.

Ferrexpo, the FTSE 250 iron ore pellet company, was little changed, trading at 119p.

However, negative talk around steel is believed to have capped gains for iron.

Recent data for Mysteel shows the production of steel rebar and wire rods fell by 1% in the week ending 6 April, while demand supposedly dropped by 7%.

Reports out of China, the world’s top steel producer, suggest that the nation will cut metal output by 2.5% this year, the third consecutive annual decline.

This is also believed to have some read across to metal miners which have continued to drag the FTSE 100.

Fresnillo is down 1.31% while Anglo-American has shed 0.7%.

Elsewhere, Endeavour Mining has lost 0.65% while Rio Tinto has fared better than its peers and is down only 0.09%.

11.09am: London companies urged to resist US listings

Companies thinking of making the switch across the pond and listing in the US may need to reassess before doing so.

In recent months, semi-conductor company ARM chose a US listing over one in the UK, while Irish building materials business CRH decided to make the transfer.

CRH cited that most of its revenues are derived from operations in the US, which could prompt a host of FTSE 100 companies in a similar situation to consider the switch, including Ashtead, Compass Group, Pearson, National Grid and Smith & Nephew.

However, analysts at Liberum have weighed in and noted that, due to inflation having not been an issue for the best part of a decade, many companies have not disclosed these as risks.

As such, the lack of disclosure leaves them open to “frivolous” class action lawsuits from investors who “think they are entitled to stocks as a riskless investment.”

“While this is unlikely to work outside the US, it may well work there,” said the broker.

Liberum goes on to urge European companies thinking of listing shares in the US that they may expose themselves to material and unwanted risks.

FTSE 100 is up 3.7% year-to-date, while the S&P 500 is up 7.5% since the turn of the year.

The Dow Jones is up 1.6% so far in 2023.

10.45am: Sugar futures rise

Raw sugar futures climbed to over US$24.5 per pound in April, the highest level for over a decade as concerns over tight global supplies rear their head.

Sugar production in India, the second largest producer globally, is estimated to fall to 33.5mln tonnes this fiscal year from 34.5mln tonnes, according to the All India Sugar Trade Association.

Rumours are circulating that India may not approve additional sugar exports in the year to September, also.

Production is also expected to decrease in other major producers, mainly Thailand and China, although this is offset by Brazil, the largest cultivator globally, expecting to produce 40.3mln tonnes in the year that just started, the second-highest amount on record.

The Teucrium Sugar Fund was up 2% yesterday in the US, changing hands at 2.13%.

Associated British Foods, which has a sugar division, was little changed, trading at 1,971p.

10.15am: De La Rue issues warning

In some business news, currency printing company De La Rue saw shares tumble 19% after it warned that falling demand for bank notes means adjusted operating profit for the financial year 2023 is expected to be below market expectations.

The Basingstoke, England-based firm said profit is forecast to be a mid-single-digit percentage below market expectations following the downturn in its Currency business with demand for banknotes at the lowest levels for over 20 years.

Elsewhere, Everyman Media showed there is life in the cinema scene still amid the Cineworld collapse.

The group swung to a full-year profit in 2022 and said it remains “confident of another year of strong operational and financial progress,” although shares were little changed.

FTSE 100 was up 49 points to 7,834. 

9.59am: Job availability rises

Availability of UK jobs candidates rose for the first time in more than two years last month, according to a survey of recruiters, while levels of pay increase were close to the slowest in two years.

The supply of workers in March increased for the first time since February 2021, supported by “modest” rises in both permanent and temporary staff availability, the KPMG and REC jobs report showed on Wednesday.

A number of recruiters mentioned a relative improvement in confidence among job seekers, though staff supply was also increased by recent redundancies.

While availability improved, economic uncertainty caused firms to make redundancies and often opt for temporary hires over permanent placements, making it a “curate’s egg” of a month, said KPMG UK partner Claire Warnes.

“Over the past few weeks, we have seen a bit more confidence among employers, and this is reflected in this latest data,” said Neil Carberry, chief executive of REC, highlighting the “significant” easing of the contraction in the permanent jobs market in March.

“After six months of slowing activity from last summer’s peak, the market is now better described as flat than declining. This is the mark of an economy performing better than was expected at the end of last year,” Carberry added.

The British pound continues to remain stable against the US dollar, currently at US$1.24175.

9.48am: CAC 40 reaches record high

Over in Europe, the benchmark French index CAC 40 extended gains for a third consecutive day, up 0.41%, to trade at record levels of 7,421, shrugging off riots and strikes which are currently engulfing French businesses.

In Germany, the DAX is up 0.34% to 15,711 while the IBEX 35 in Spain is leading the way for major European indices, up 0.86% to 9,315.

London’s blue-chip index, the FTSE 100, is up 06%, or 46 points, to 7,832.

9.25am: UK supermarkets still battling inflation

Away from some of the US-focused updates, Citi Group said UK supermarkets are still battling with record inflation.

Analysts at the bank hosted a deep dive on Trends in the British Aisles with Kantar and found that four-week inflation of 17.5% was a record, despite a lower month-on-month progression.

Discounters, including Aldi and Lidl, continue to drive inflation figures, followed by Asda and Morrison.

Sainsbury’s has the lowest inflation and volume losses among supermarkets.

German’s Aldi and Lidl are continuing to benefit from customers trading down, although “the gains have begun to taper.”

Supermarkets say they are still wrestling with record inflation, which is being passed onto consumers, although the costs of commodities, such as wheat, coffee and sunflower oil, are all down in the last year.

Shares in Sainsbury’s were down 0.3% to 278p, while slipped 0.15% to 267p.

Marks and Spencer remained flat, changing hands at 165p.

FTSE 100 was up 45 points, to 0.59%, to 7830.

9.03am: FTSE 100 going strong

FTSE 100 continues to move higher in the first hour of trading, rising for the fourth consecutive session, gaining 34 points to 7,821.

The broader FTSE 250 index remains steady, down 4 points to 18,962.

Energy companies Shell, Centrica and SSE linger towards the top of the index, with crude oil trading slightly higher at US$81.67 per barrel, with Brent oil and natural gas both steady.

Miners continued to drag the index, with steel rebar futures falling below 4000 CNY per tonne, the lowest level since 5 January, amid weak demand during China’s peak construction season.

Anglo-American, Fresnillo, Rio Tinto and Endeavour Mining all continued to trade in negative territory.

With a dearth of financial news scheduled for the UK today, all eyes are on economic data from across the pond.

The core inflation rate, which is inflation related to all commodities except food and fuel prices, is expected to remain flat at 5.5%.

Headline inflation, which includes volatile food and fuel prices, is forecasted to fall to 5.3% from 6%, according to trading economics.

UK investors, according to analysts, continued to remain cautious ahead of US data, which could easily set the tone for the Bank of England’s monetary policy.

Uncertainty in the markets is clearly playing into the hands of haven assets, with gold up 0.5% in the last day to US$2,013 per ounce.

8.38am: IMF upgrades UK forecast

The International Monetary Fund (IMF) has upgraded its forecast for the UK economy this year and next but still expects it to grow slower than other Group of Seven (G7) countries.

UK output is expected to contract by 0.3% this year before rebounding to grow by 1% next year, economists working for the Washington-based think tank said.

It puts the UK firmly at the bottom of the G7 group of advanced economies this year. The only other economy that the IMF expects to decline is Germany’s, which is expected to contract by 0.1%.

But it was an improvement on a previous IMF forecast, which had predicted that the UK economy would contract by 0.6% this year.

“Notably, emerging market and developing economies are already powering ahead in many cases, with growth rates (fourth quarter over fourth quarter) jumping from 2.8% in 2022 to 4.5% this year,” it said.

“The slowdown is concentrated in advanced economies, especially the euro area and the UK.”

Next year sees the UK returning to growth, according to the IMF. Output is expected to increase by 1%, putting the UK towards the bottom of the G7 yet again, tied with Japan and slightly ahead of Italy, which is set to grow by 0.8%.

The economists also warned of further problems in the months ahead, even following the recent chaos in the banking sector which saw several US banks go out of business and Credit Suisse bought by rival UBS.

“Below the surface, however, turbulence is building, and the situation is quite fragile, as the recent bout of banking instability reminded us,” the IMF said.

“Inflation is much stickier than anticipated even a few months ago. While global inflation has declined, that reflects mostly the sharp reversal in energy and food prices.

“But core inflation, excluding the volatile energy and food components, has not yet peaked in many countries.”

In the UK inflation is expected to fall from 9.1% last year to 6.8% this year and 3% in 2024.

FTSE 100 was up 20 points to 7,806.

8.27am: FTSE 100 opens higher

FTSE 100 opened higher, gaining 21 points to 7,807 and defying pre-market expectations that London’s blue-chip index would open one point lower.

Frasers Group charged ahead at the top of the index, climbing 1.15% after yesterday’s figures from the British Retail Consortium showed retail sales in March rose by 4.9% compared to 12 months earlier.

Analysts also suggested that fewer people are expecting to tighten their purse strings, which resulted in investors flocking to retail assets.

Burberry gained 0.72% while Next’s shares were 0.4% higher.

Mining stocks, however, were weighing on the FTSE 100, with Endeavour, Fresnillo and Anglo-American all in negative territory, down 0.8%, 0.79% and 0.72% respectively. 

8.00am: Gold continues to surge

Gold continues to surge as investors seek out haven assets amid market turmoil, with all eyes today on key data from the US, including the core inflation rate and FOMC minutes.

The precious metal has bounced over 0.6% in the last 24 hours to US$2015.76 per ounce, although shy of last week’s all-time high of US$2,034.

Elsewhere, Bitcoin, often referred to as digital gold, has retreated slightly from yesterday’s price of US$30,000, the cryptocurrency’s highest level since June last year.

“Investors are keen to see more evidence that hot prices are losing steam, but are still worried that the CPI numbers out later will indicate that the cooling process is proving slow going,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

7.04am: FTSE to open little changed

The FTSE 100 is expected to open little changed as investors look ahead to the US CPI print and the minutes of the latest FOMC meeting for clues as to the Federal Reserve’s next move..

Spread betting companies are calling London’s lead index down by one point.

US stocks ended mixed on Tuesday with the Dow Jones Industrial Average closing up 98.27 points at 33,684.79, the S&P 500 flat at 4,108.94, while the Nasdaq Composite slipped 52.48 points at 12,031.88.

In Asia, on Wednesday, the Nikkei 225 index was up 0.6%,  In China, the Shanghai Composite was up 0.2%, but the Hang Seng in Hong Kong was down 0.8%.