Wall Street muted and FTSE higher as traders weigh up UK inflation data and US earnings #UKFinance

Live22 updates

• Wed 16 October 2024 at 9:28 am GMT-6

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  Well that’s all from us today, thanks for following along.

  Be sure to join us again tomorrow when we’ll be back for more of the latest markets news and all that’s happening across the global economy.

  Until then, have a good evening…

• Wed 16 October 2024 at 9:07 am GMT-6

  How the UK’s capital gains tax compares with other countries

  As nervousness grows that Rachel Reeves will announce an increase in capital gains tax (CGT) in the upcoming autumn budget, here’s how other countries compare with the UK on their rates.

  Speculation has been rife that the chancellor will raise CGT rates in the budget on 30 October, with the Guardian reporting last week that she had considered hiking it as high as 39%.

  However, prime minister Keir Starmer dismissed the suggestion that rates would be raised that high, in an interview with Bloomberg Television at the UK’s International Investment Summit in London on Monday.

  “A lot of speculation is getting pretty wide of the mark,” said Starmer. When asked specifically on that 39% figure, he said this was “getting to an area which is wide of the mark”, but did not offer any more detail.

  It is expected that Reeves could still announce some form of increase in CGT, particularly given the fact that she has ruled out raises in other areas, such as value added tax (VAT) and the main rates of income tax.

  CGT is levied on the profits made from selling assets, including a second property, shares and business assets. Rates of CGT in the UK range from 10% to 20% on assets not including residential property and “carried interest” gains, which refers to share of profits paid to the manager of an investment fund.

  Read the full article here

• Wed 16 October 2024 at 8:48 am GMT-6

  London Underground workers to stage strikes in pay dispute

  

  London Underground workers, including drivers, instructors and those in engineering, are set to stage a series of strikes in November in a dispute over pay.

  Members of Aslef will walk out on different days in the first few weeks of next month.

  Finn Brennan, Aslef’s full-time organiser on London Underground, said:

  “We don’t want to go on strike – we don’t want to make travelling in and around the capital more difficult for passengers and we don’t want to lose a day’s pay – but we have been forced into this position because LU management won’t sit down properly and negotiate with us.“Our members voted by over 98% in favour of strike action, but Underground management are still refusing to even discuss key elements of our claim.

  “They refuse to discuss any reduction in the working week or introducing paid meal relief to bring Underground drivers in line with those on the Elizabeth line and London Overground.”

• Wed 16 October 2024 at 8:21 am GMT-6

  State pension set to rise £473

  State pensioners are set to see payments rise by 4.1% next year, meaning an increase of £473 under the triple lock guarantee.

  It comes as data from the Office for National Statistics (ONS) revealed that inflation in the UK fell below the Bank of England’s target rate last month for the first time since April 2021.

  Under the triple lock, payments are raised by either the rate of inflation, average earnings or 2.5%, whichever is the highest figure. With the inflation figures out, the government will have to raise state pensions by the earnings figure of around 4.1%.

  A 4.1% rise would mean an annual increase of around £473 for the new state pension and £361 for the basic pension. The government has not commented on the figures, but is expected to confirm the 4.1% increase during the autumn statement speech on 30 October.

  Helen Morrissey, pensions columnist at Yahoo Finance UK and head of retirement analysis at financial services firm Hargreaves Lansdown, said the inflation figure “spells good news for the battered budgets of pensioners who have struggled with soaring costs”.

  “It’s also the final piece in this year’s state pension triple lock puzzle. As expected, inflation undershot average wages, putting pensioners on track for a 4.1% increase next April after wages figures were revised yesterday.”

• Wed 16 October 2024 at 7:00 am GMT-6

  Global deal activity down 12.5% during Q1-Q3

  Global deal activity has fallen 12.5% year-on-year during Q1-Q3, GlobalData found.

  A total of 36,992 deals (comprising mergers & acquisitions (M&A), private equity, and venture financing deals) were announced globally during January to September — a 12.5% year-on-year decline over 42,288 deals announced during the same period in 2023.

  An analysis of GlobalData’s deals database disclosed that the volume of M&A deals declined by 6.7% during Q1-Q3 2024 compared to the same period a year ago, while the number of private equity deals and venture financing deals experienced YoY fall of 8.9% and 22.2%, respectively.

  Aurojyoti Bose, lead analyst at GlobalData, said:

  “The majority of the decline in global deal activity came from Q1 and Q2 while the impact was relatively much lesser in Q3. Although the deal activity continued to remain subdued in 2024, the impact seems to be diminishing in recent months or quarters.

  For instance, the decline in Q3 2024 compared to Q3 2023 remained at just 1%, whereas when compared between Q1 2024 and Q1 2023, the decline stood much higher at around 20% in Q1 2024.

  “The relatively lesser decline could be attributed to improving deal-making sentiments in some regions. In fact, the trend across regions also remained a mixed bag during Q1-Q3 2024, with regions like Asia-Pacific showcasing just a single-digit decline while North America experienced a double-digit decline.”

• Wed 16 October 2024 at 6:43 am GMT-6

  Asian equities could face downward pressure

  

  Asian equities could face downward pressure, particularly as traders grapple with concerns about future chip demand. This follows weak guidance from ASML, which adds to the existing challenges for semiconductor companies.

  Anderson Alves, analyst at ActivTrades, said:

  “Anxiety has also intensified with reports that the US is considering new restrictions on chip exports to specific countries, particularly targeting Nvidia and AMD, citing national security concerns.”

  “As a result, the semiconductor sector is likely to underperform, with traders keenly awaiting TSMC’s earnings report on Thursday.”

  “Looking ahead, market participants are anticipating further economic measures from China. On Thursday, China’s Housing Ministry, Ministry of Finance (MoF), and the People’s Bank of China (PBoC) are set to hold a briefing, while the National Development and Reform Commission (NDRC) will convene a meeting on October 21st to discuss financing for small businesses.”

  “Traders may remain cautious and stay on the sidelines if immediate support measures are not forthcoming.”

• Wed 16 October 2024 at 6:29 am GMT-6

  Ryanair to carry 5 million fewer passengers next year

  …And sticking with news from airlines, Ryanair boss Michael O’Leary said the discount carrier expects to carry 5 million fewer passengers next year than previously projected due to delayed aircraft deliveries from strike-hit Boeing.

  The Telegraph has the details…

  The Irish airline expects to attract around 210m passengers in 2025, compared with the anticipated 215m, Mr O’Leary told the Telegraph in Brussels.

  That amounts to growth of about 5% on this year’s expected tally, down from the planned 7pc, he said.

  Ryanair is due to take delivery of 20 737 Max aircraft by the end of December that were delayed from the summer after Boeing was ordered by regulators to slashed production rates amid a quality control crisis.

  Following a walkout by 33,000 Boeing machinists in a dispute over pay, those jets may now arrive early in the new year.

  However, Mr O’Leary said Ryanair expects to receive only half of the 30 further planes it is due to receive next spring, leaving it with 35 additional aircraft for summer 2025 instead of the planned 50.

  O’Leary told Reuters:

  “We were supposed to get 20 deliveries before the end of December. They’ll probably come now in January and February, and that’s fine. We’ll have them in time for next summer.

  “The big issue for Ryanair is we’re due 30 aircraft in March, April, May and June of next year, and how many of those will we get?”

  “I think we’re clearly going to walk back our traffic growth for next year, because I don’t think we’re going to get all those 30 aircraft.”

• Wed 16 October 2024 at 5:58 am GMT-6

  Airbus to cut up to 2,500 jobs

  Airbus is planning to cut up to 2,500 jobs in its satellite division as Europe’s aerospace industry struggles with a fall in demand.

  The firm has started informing worker representatives today, according to AFP. The cuts will hits its entire defence and space division, which employs 35,000 people, and last year accounted for revenue of about €2bn (£1.7bn).

  Airbus and the main French unions refused to comment ahead of meetings this afternoon with employee representatives.

  It comes as net profit fell by 46% to €825m euros in the first half of the year, dragged down by a €989m writedown in its space business.

• Wed 16 October 2024 at 5:35 am GMT-6

  How to tell if your employer is ‘meno-washing’

  Your boss has put up a poster in the office kitchen about the symptoms of menopause, which directs anyone struggling with symptoms to a charity website. But when you’ve asked for time off to go to a doctor’s appointment, or to work from home because the office makes your hot flushes and brain fog worse, they’ve been less than sympathetic.

  Although many companies take supporting menopausal workers seriously, this isn’t always the case. Behind the posters and one-off work wellness talks is a phenomenon called meno-washing — where employers appear to support people without actually providing practical, reasonable accommodations.

  “Meno-washing occurs when organisations superficially adopt menopause-friendly policies or initiatives without genuinely committing to meaningful support or deep cultural change,” says Lauren Chiren, CEO and founder of Women of a Certain Stage, which supports women in business through menstruation and menopause.

  “It’s similar to ‘greenwashing’ or ‘virtue signalling’, where the focus is on public image rather than real, sustained action.”

  Read the full article here

• Wed 16 October 2024 at 5:16 am GMT-6

  Market movers at midday

  Here’s a quick look at what’s been happening in equity markets this morning…

  • European markets were mostly lower, with luxury stocks providing a drag as industry bellwether LVMH disappointed with a 3% drop in organic revenues in the third quarter owing to ongoing weakness in China.

  • Premier Inn owner Whitbread was the high riser of the morning after lifting its half-year dividend by 7% and saying it would buy back an additional £100m in shares, despite a fall in earnings. The company held annual guidance as pre-tax profit for the six months to 29 August fell 22% to £309m on flat revenue of £1.5bn.

  • Antofagasta was also in favour after the copper mining giant reported a 15% increase in third-quarter production as it maintained expectations for full-year output to hit the lower end of guidance.

  • Asset manager Ninety One was a heavy faller, dropping 5% after reporting a slight fall in assets under management in its second quarter. AuM totalled £127.4bn by 30 September, up from £123.1bn last year but down from £128.6bn at the end of June.

  • Airline stocks IAG, easyJet and Wizz Air were all nursing losses, pulling back after strong gains the previous session as oil prices tumbled. Brent was up 0.3% at $74.47 a barrel in morning trade, having dropped more than $3 on Tuesday.

  • Burberry was weaker as shares in the British luxury brand fell in sympathy with European peer LVMH.

• Wed 16 October 2024 at 4:56 am GMT-6

  ASML and Nvidia at the centre of a chip stock sell-off

  ASML’s warning yesterday has spooked investors holding anything linked to the semiconductor space.

  It was a blanket sell-off despite ASML, which nosedived 16%, saying AI-related demand remains strong, which suggests investors are worried that this warning is the sign of things to come on a broader basis.

  Russ Mould, investment director at AJ Bell said:

  “Names like Nvidia, ARM Holdings, Lam Research, Advanced Micro Devices and Applied Micro Devices all experienced a share price slump.

  “Dutch semiconductor equipment maker ASML missed third quarter order expectations and lowered guidance for 2025, blaming weakness in demand outside of the AI space. That took the market by surprise and led to a bad day for Wall Street, with the tech-heavy Nasdaq index falling by 1%.

  “The chips industry is essentially split into two – one part is focused on AI; the other is on ‘legacy’ areas like electronic devices and automotives.

  “Companies like Apple have experienced tougher market conditions for smartphone sales and the electric vehicle industry is growing at a slower rate than expected, but this is old news and should have been baked into ASML’s forecasts. That’s why the market was so keen to know why ASML still disappointed on earnings.

  “Two of ASML’s customers are experiencing their own issues, being Samsung and Intel, and that looks to have caused a trickle-down effect. ASML’s equipment is incredibly expensive and is not a casual purchase.

  “Given ASML attributed its problem to factors outside of the AI space, one might be confused as to why Nvidia’s shares took a dive as it is at the heart of the artificial intelligence boom. Investors often fail to isolate certain stocks when something bad happens in a sector, leading to a blanket sell-off. However, pre-market trading doesn’t show a big rebound in Nvidia today, which suggests investors don’t feel confident to buy on the dip and that they’re asking tougher questions about whether all chip companies are about to hit a bump in the road.”

• Wed 16 October 2024 at 4:39 am GMT-6

  NIESR: Inflation likely to rise to around 2.5%

  Main points from NIESR today…

  Today’s ONS numbers indicate that annual inflation has dropped to 1.7 per cent in September, taking inflation temporarily below the Bank of England’s 2 per cent target due to base effects.

  The upcoming 10 per cent increase in the energy price cap in October will exert sizeable inflationary pressure, potentially raising the headline rate by an estimated 0.5 percentage points. We therefore expect inflation to rise to around 2.5 per cent by end of year due to base effects and the energy cap rise.

  Services inflation remains the main contributor to headline inflation, but has shown signs of easing, recording 4.9 per cent in September. This has backed a slowdown in core inflation, which recorded 3.2 per cent in September.

  Moving forward, it would be important to keep an eye on month-on-month inflation figures (‘new’ inflation) to determine to what extent we inflation will rebound in the coming months.

• Wed 16 October 2024 at 4:23 am GMT-6

  Oil lacklustre amid Iran oil spill

  

  After erasing nearly all gains from the previous week, oil prices (BZ=F) opened Wednesday’s trading session with cautious gains as traders shifted their focus back to the unfolding situation in the Middle East.

  Brent crude futures rose 0.3%, settling at $74.46 a barrel, while US West Texas Intermediate (WTI) (CL=F) crude edged 0.3% higher to $70.81 per barrel during early European trading.

  Tuesday’s slump was triggered by disappointing news from China, where consumer prices rose less than anticipated, indicating sluggish consumer demand. This was compounded by the International Energy Agency’s (IEA) third consecutive downward revision of its global oil demand forecast for 2024.

  Adding to the market’s uncertainty, a report from the Washington Post revealed that Israel had told the United States it would refrain from targeting Iranian oil infrastructure in its retaliatory strikes. This announcement initially dampened the so-called wartime premium on oil prices. However, Israel subsequently stated that it would retain the discretion to make its own decisions regarding potential strikes on Iran, reigniting speculation about possible targets.

  Yeap Jun Rong, an analyst at IG, said:

  “Prices still lack a bullish catalyst for now, as market participants fade the risks of disruptions in Middle East energy supplies, while China’s fiscal stimulus efforts seem to lack clarity.”

• Wed 16 October 2024 at 4:01 am GMT-6

  UK house prices rise by 2.8%

  

  Average house prices in the UK roseby 2.8% in the year to August, the Office for National Statistics said on Wednesday.

  The annual growth rate accelerated from 1.8% in July, raising typical house prices to £293,000.

  Average house prices increased in England to £310,000, up 2.3%, in Wales is was up 3.5% to £223,000, and in Scotland to £200,000 — a rise of 5.4%.

  The average house price for Northern Ireland was £185,000 in the second quarter of 2024, up 6.4% annually.

• Wed 16 October 2024 at 3:47 am GMT-6

  Landlords exiting market with potential tax changes and stricter regulations

  Rightmove’s Tim Bannister said:

  “While we’re seeing some signs of improvement in the market’s chronic levels of demand and supply imbalance helped by a slight increase in the number of available rental properties, affordability remains a key challenge for renters as prices continue to hit new records. Tenant competition has eased slightly from last year, but the market is still far from balanced.

  “We are seeing some landlords choosing to exit the market with potential tax changes and stricter EPC regulations as additional factors in landlords’ decision-making. With rental supply under strain, incentivizing landlords to invest in energy-efficient upgrades or offering tax relief could help maintain rental supply and, ultimately, ease affordability pressures for tenants.”

• Wed 16 October 2024 at 3:25 am GMT-6

  Average rent soars to £2,694 in London and £1,344 across UK

  The cost of rent outside of London have surged to a record high of £1,344 per calendar month (pcm), marking the 19th consecutive quarterly record.

  This represents a 5.2% increase from last year, albeit the slowest rate of growth since 2021, according to figures from property site Rightmove. In London, the average rent has similarly soared to £2,694 pcm in the third quarter of 2024, a 2.5% rise from last year’s £2,627 pcm

  Both national and London price trends are in line with Rightmove’s end-of-year prediction for advertised rent growth, with advertised rents predicted to be 5% higher by the end of 2024 outside of London, and 3% higher in London.

  The average number of inquiries per rental property has decreased to 15 from 23 last year, yet this figure is still nearly double the 8% recorded in 2019. Although available rental properties have increased by 13% year-on-year, they remain 27% below pre-pandemic levels.

• Wed 16 October 2024 at 3:00 am GMT-6

  Pound falls to two-month low

  The pound (GBPUSD=X) has fallen sharply lower to its lowest level in two months after inflation fell by more than expected last month.

  The pound fell 0.6% against the dollar, trading at $1.2991, having remained stable prior to the inflation figures.

  The UK’s inflation rate dropped to 1.7% year-on-year in September, down from 2.2% in August. This figure marks the lowest inflation reading since April.

  Traders will be calculating that September’s larger-than-expected drop in inflation makes it easier for the Bank of England to cut interest rates, which makes it less lucrative to hold sterling.

  Joe Maher, assistant economist at Capital Economics, said: “We expect sterling to weaken by approximately 4% against the euro and about 1% against the dollar by the end of 2025.

  “We anticipate yield gaps to move against sterling, particularly in relation to the euro, over the next year. Our view is that the Bank of England will lower interest rates by significantly more than what is currently reflected in money markets.”

  Sterling was also lower against the euro (GBPEUR=X), slipping 0.5% to €1.1940 at the time of writing.

• Wed 16 October 2024 at 2:44 am GMT-6

  Odds of November interest rate cut jump

  

  The latest figures also raise pressure on the Bank of England to cut interest rates from the current level of 5% to keep inflation at its target level.

  Money markets now predict a 91% chance of a quarter-point cut from the Bank of England at its next meeting in early November. This is up from just below 80% before the inflation report was released.

  This would bring UK interest rates down from 5% to 4.75%.

  Lindsay James, investment strategist at Quilter Investors, said:

  “For the first time in more than three years inflation is back below the Bank of England’s 2% target. With inflation falling below this level and the pace of wage growth slowing, the conditions appear ripe for another rate cut at the Bank of England’s next decision in early November, and maybe even the one after in December too.

  “This will please the government in the run-up to the hotly anticipated budget, where we are being repeatedly told tough decisions are to be announced, so any sliver of good economic news will likely be pounced upon.”

  BoE governor Andrew Bailey had previously indicated a desire to bring interest down, saying earlier this month that rate cuts could become “more aggressive” if needed.

• Wed 16 October 2024 at 2:27 am GMT-6

  Where did prices change?

  • Food and non-alcoholic beverages: 1.9%, up from 1.3% in August

  • Alcoholic beverages and tobacco: 4.9%, down from 5.8%

  • Clothing and footwear: 0.8%, down from 1.6%

  • Housing, water, electricity, gas and other fuels: -1.7%, down from -1.6%

  • Furniture, household equipment and maintenance: -1%, up from -1.3%

  • Health: 5.2%, down from 5.5%

  • Transport: -2.2%, down from 1.3%

  • Communication: 5.2%, up from 4.1%

  • Recreation and culture: 3.8%, down from 4%

  • Education: 4.4%, down from 4.5%

  • Restaurants and hotels: 4.1%, down from 4.3%

  • Miscellaneous goods and services: 3.3%, unchanged.

• Wed 16 October 2024 at 2:19 am GMT-6

  UK inflation drops below 2% target

  UK inflation fell to 1.7% in the year to September, the lowest rate since April 2021, the Office for National Statistics (ONS) said.

  According to new figures, the Consumer Price Index (CPI) rose by 1.7% in the 12 months to September 2024, down from 2.2% in August. This means inflation has fallen below the government-set target of 2% for the first time since 2021.

  ONS chief economist Grant Fitzner said:

  “Inflation eased in September to its lowest annual rate in over three years. Lower airfares and petrol prices were the biggest driver for this month’s fall.”

  Core inflation, which excludes energy, food, alcohol and tobacco, dropped to 3.2% from 3.6% in August.

  Price rises in the services sector, one of the motors of the UK economy, eased to 4.9% last month from 5.6% in August, hitting its lowest rate since May 2022.

  Investors had expected inflation to fall to 1.9%. Inflation has been on a downward trajectory since hitting a peak of 11.1% in October 2022, driven by increases in energy prices and a sharp rise in food prices.