|
Stocks in Europe were higher on Wednesday morning, amid the growing conviction that the Federal Reserve will cut rates at its next meeting, after softer-than-expected US inflation data. The annual US consumer price inflation inflation rate was unchanged at 2.7% in July. This was the same as in June but lower than the FXStreet-cited market consensus of an uptick to 2.8%. Swissquote analyst Ipek Ozkardeskaya commented: ‘Yesterday, US inflation data was mixed, but the market reaction was not. Core inflation in the US posted its strongest gains this year, and the yearly figure accelerated more than expected to 3.1% in July. However, headline inflation eased more than expected to 2.7%. Normally, core inflation is the measure the Federal Reserve (Fed) focuses on when deciding monetary policy. In that context, the market could have reacted by scaling back expectations of a September rate cut. ‘But no investors instead increased September cut expectations, thinking that imported goods inflation remained lower than feared as companies continued to absorb tariff costs.’ The FTSE 100 index traded up 22.41 points, 0.2%, at 9,170.22. The FTSE 250 added 87.89 points, 0.4%, at 21,930.48, and the AIM All-Share rose 0.81 of a point, 0.1%, at 760.08. The Cboe UK 100 was up 0.4% at 919.46, the Cboe UK 250 was 0.3% higher at 19,327.73, and the Cboe Small Companies was down 0.1% at 17,082.17. In European equities on Tuesday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was 0.6% higher. The pound rose to $1.3537 early Wednesday, from $1.3509 late Tuesday. The euro climbed to $1.1701 from $1.1682. Against the yen, the dollar slipped to JP¥147.52 from JP¥147.83. ‘Yesterday’s US CPI release turned out to be a dollar-negative event. Core inflation accelerating to 3.1% YoY and 0.33% MoM is far from ideal, but equally not alarming enough to overshadow the deterioration in the jobs market. So, the September Fed cut remains firmly priced in (23bp) along with another 35bp by year-end. At this stage, the dollar has few bullish arguments to hold onto. Upcoming surveys might paint a better activity picture, but it’s all about the jobs market now: a substantial recovery in the dollar from these levels appears realistic only if jobs figures turn significantly stronger,’ analysts at ING commented. ‘On the topic of jobs data, it was reported yesterday that the new chief of the Bureau of Labor Statistics, EJ Antoni, is considering switching from monthly to quarterly payroll reports during a methodology review period. It’s hard to gauge exactly how seriously markets are taking this threat: the reaction has been muted. We think the downside risks for the dollar are substantial should the BLS go ahead with the frequency change.’ Fox Business reported that in an in early-August interview, so prior to his appointment but after the July jobs data, Antoni suggested suspending the monthly report. ‘How on earth are businesses supposed to plan or how is the Fed supposed to conduct monetary policy when they don’t know how many jobs are being added or lost in our economy? It’s a serious problem that needs to be fixed immediately,’ he told Fox News Digital earlier this month. ‘Until it is corrected, the BLS should suspend issuing the monthly job reports but keep publishing the more accurate, though less timely, quarterly data.’ In New York on Tuesday, the Dow Jones Industrial Average and S&P 500 added 1.1%, while the Nasdaq Composite climbed 1.4%. The Nikkei 225 ended up 1.3% in Tokyo on Wednesday. In China, the Shanghai Composite rose 0.5%, while the Hang Seng Index added 2.5%. In Sydney, the S&P/ASX 200 closed down 0.6%. The yield on the 10-year US Treasury narrowed to 4.26% on Wednesday from 4.30% at the time of the London equities close on Tuesday. The 30-year yield eased to 4.85% from 4.89%. In London, Beazley shares slumped 8.3%. It lowered its premium growth guidance, ‘reflecting current market conditions’, though it posted an increase for the first half. Pretax profit in the first half of 2025 fell 31% to $502.5 million from $728.9 million a year prior, though insurance written premiums increased 2.0% to $3.19 billion from $3.12 billion. Looking ahead, Beazley lowered its premium growth guidance to ‘low-to-mid single digits’. It had previously expected a ‘mid-single digits’ rise. Hill & Smith jumped 12%. It reported a rise in half-year earnings, lifted its dividend and announced a new share buyback. Pretax profit in the first half of 2025 rose 9.9% to £63.5 million from £57.8 million a year prior. Revenue was 2.1% higher at £431.6 million from £422.7 million. ‘We have delivered another record performance in the first half, driven by a strong performance in our larger US platform businesses and better profitability in the UK. We also delivered strong free cash flow resulting in minimal leverage which provides us with significant financial firepower. Our second half outlook remains positive, underpinned by continued growth in our US end markets,’ CEO Rutger Helbing said. Hill & Smith expects full-year underlying operating profit in line with market expectations, which stand at £150.4 million, representing a 4.8% rise from £143.5 million it achieved in 2024. In the first half of 2025, it rose 7.5% to £73.5 million. The firm raised its half-year dividend by 9.1% to 18.0p per share from 16.5p. In addition, it announced a £100 million share buyback for the next 18 months. The CEO added: ‘Our capital allocation priorities are unchanged, and we continue to see attractive opportunities to deploy capital organically, whilst also making good progress with an active M&A pipeline. Having assessed the capital requirements for the group, given the strength of the balance sheet and cash generation we have the capacity to return capital to shareholders, without compromising our ability to deliver on our growth priorities.’ Elsewhere in London, Shoe Zone slumped 21%. It said it has suffered ‘challenging trading conditions’ with consumer spend under pressure following last year’s UK budget. The retailer now expected adjusted pretax profit for the year to September 27 of around £2.5 million, its forecast halved from £5.0 million. ‘We have seen less discretionary spend, with the continued impact of inflation, interest rates and higher savings rates, all of which have decreased footfall, with a resultant reduction in revenue and profit,’ Shoe Zone added. Glanbia added 11% as the nutrition company hailed ‘first half momentum’ and lifted its annual outlook. It also named Independent Non-Executive Director Paul Duffy as its next chair, replacing Donard Gaynor from the start of next year. Glanbia said pretax profit in the first half of 2025 fell by a third to $114.5 million from $169.7 million. Revenue, however, advanced 6.1% to $1.93 billion from $1.82 billion. It now expects adjusted earnings per share between 130 and 133 cents for the full year, its outlook raised from the 124-130 cents range. A barrel of Brent fell to $65.87 early Wednesday, from $66.29 at the time of the London equities close on Tuesday. Gold edged up to $3,356.60 an ounce from $3,355.98. Copyright 2025 Alliance News Ltd. All Rights Reserved.
|
