The FTSE 100 closed virtually unchanged on Wednesday as new data revealed a continued rise in UK inflation for November. Meanwhile, US markets saw gains, with the Dow Jones Industrial Average halting a multi-day losing streak as investors anticipate the Federal Reserve’s latest decision on interest rates.
Table Content:
UK inflation reached 2.6% in November, climbing from 2.3% the previous month, according to official figures. The Office for National Statistics (ONS) attributed the increase to rising fuel and grocery prices, along with a budget-related increase in tobacco duty. This marks the second consecutive month of elevated inflation, reaching its highest point since March.
Market Performance and Central Bank Focus
European markets displayed mixed performance:
- The FTSE 100 remained relatively flat.
- Germany’s DAX edged up by 0.1%.
- The CAC 40 in Paris rose 0.3%.
- The pan-European STOXX 600 saw a 0.2% increase.
In the US:
- The Dow Jones Industrial Average rebounded with a 0.3% gain, breaking its recent losing streak, which was its longest in nearly five decades. Tech stocks have recently outperformed the blue-chip index.
- The S&P 500 and the tech-focused Nasdaq Composite hovered around the flatline.
Market attention is now firmly fixed on upcoming central bank decisions:
- The Bank of England’s interest rate decision is due Thursday. Despite strong inflation and recent pay growth data, expectations lean towards maintaining the current rate at 4.75%.
- The US Federal Reserve commenced its final meeting of the year on Tuesday. A 0.25% rate cut is widely anticipated on Wednesday, potentially marking the last cut for a while as inflation persists. Focus remains on insights into the future trajectory of interest rates, particularly for early 2025.
Eurozone Inflation and Other Economic Updates
Eurostat’s revised data indicates that Eurozone inflation rose to 2.2% in November, up from 2.0% in October but lower than the initial estimate of 2.3%. Core inflation, excluding volatile items, held steady at 2.7%. Annual inflation in the European Union reached 2.5% in November.
Oil prices experienced a slight increase on Wednesday, influenced by the Fed’s impending rate decision and developments in the Chinese economy. Brent crude futures rose nearly 0.6%, while US West Texas Intermediate (WTI) climbed almost 0.7%. Recent data points to slowing retail sales growth in China, but officials have indicated plans for increased fiscal spending in 2025 to stimulate consumption.
In other economic news:
- Average private rents in the UK surged by 9.1% year-on-year in November, reaching £1,362 per month in England.
- Average UK house prices increased by 3.4% in the year to October, reaching £292,000.
Conclusion
Rising inflation in the UK and the Eurozone, coupled with anticipation surrounding central bank decisions, dominated market movements on Wednesday. While the FTSE 100 remained largely unchanged, US markets saw a modest rebound. Investors await further clarity on the future direction of interest rates as central banks grapple with persistent inflation.
