The news markets had waited for finally landed earlier: the US headline inflation rate came in at +2.1% for January – significantly above the +1.9% rate previously anticipated. The higher reading must now mean the Federal Reserve will almost certainly push faster for a rate rise. Part of the higher inflation read-out was down to higher US petrol prices.
Market watchers had more or less priced three rate rises in for 2018. But the higher inflation concern must now see a fourth pencilled in. Ordinarily this might have thrown a measure of paraffin on the not-yet-out stock sell-off last week; in the event US shares barely moved until later in the day when the direction was up, again.
Across the channel Eurostat reported a +2.5% growth surge for the 28-strong EU in 2017 thanks to strong performances from Germany, France, Italy and Spain. Just as importantly, there is an expectation from economists that EU growth will stay robust: Standard Chartered thinks the EU will see +2.2% growth in 2018 and +2% in 2019. European stocks rose across the board with the German Dax up more than +1.1%.
The tsunami of economic data landing just about everywhere saw the pound climb more than +0.50% against the dollar to 1.3955 while sterling was also up +0.24% against the euro at 1.1262. Overall, the dollar spot price was down -0.52% mid-afternoon at 89.27. Tonight the FTSE 100 lifted 45 points to 7,213 with Randgold Resources and Fresnillo seeing chunky +4.6% rises while travel operator TUI shares sank more than -4.5%.
- UK FTSE 100 7,213.97 +0.64%
- DAX 12,316.24 +0.94%
- CAC 40 5,170.45 +0.88%
- Euro Stoxx 600 374.15 +0.96%
- Dow 24,687.70 +0.19%
- S&P 500 2,673.51 +0.39%
- Nasdaq 7,072.52 `+0.85%
- Nikkei 225 21,154.17 -0.43%
- Gold 1,346.20 +1.19%
- Oil WTI 58.68 -0.90%
UK private sector wages set to pick up – Bank of England
A new Bank of England report claims UK private wages will match inflation (though nothing is guaranteed and the Bank is clearly keen to show evidence for incoming rate hikes). A survey of more than 350 businesses taking in 845,000 employees claims pay rises of up to +3.1% are due this year; a good chunk of this rise is being driven by the National Living Wage – it climbs from £7.50 to £7.83 in April – claims the Bank.
“The increases in pay settlements in 2018 are also expected to be broad-based, with only the construction sector expecting pay settlements in 2018 to be the same as in 2017,” said the report.
The biggest expected increase in pay is going to be seen in consumer services, predicts the Bank. “That is because many firms in this sector will have to increase pay to meet the National Living Wage (NLW).”
GKN to return £2.5bn to shareholders in bid to fend off Melrose
Engineering operator GKN says it will hand back £2.5bn in cash to shareholders in the next three years plus offload non-core chunks of its business. The moves are a clear message to hostile takeover player Melrose Industries; Melrose criticised the move as being “short on detail”.
"The new strategy brings clarity, accountability and focus to GKN's world class businesses and will allow the group to attain world class financial performance” said GKN boss Anne Stevens. The news saw GKN shares climb +2.5% though its shares are still down -5% on the week.