Lucy Harley-McKeown
FTSE 100 and Europe close in green, US stocks up with inflation data in focus
How major markets are performing on Tuesday
In this article:
The FTSE 100 and European markets made small moves in the afternoon on Tuesday following UK wage data which showed that pay growth is slowing. Eyes will now turn to the consumer price inflation data on Wednesday in the UK and US — a key metric central banks look to in deciding the interest rate path.
The FTSE 100 (^FTSE) rose 0.2% by the closing bell in Europe. The DAX (^GDAXI) was 0.2% higher in Germany and the CAC (^FCHI) ticked up in 0.3% Paris.
Meanwhile, the pan-European Stoxx 600 (^STOXX) was 0.4% higher, having closed almost flat on Monday.
Over in the US, stocks climbed higher. The S&P 500 (^GSPC) was up 1%, the Dow (^DJI) was 0.4% in the green and the Nasdaq (^IXIC) jumped 1.7%.
US producer prices, often a signal for where consumer prices are heading, rose just 0.1% month-over-month in July, lower than economist forecasts. Year-over-year, the producer price index (PPI) rose 2.2%, nearly in line with the Federal Reserve's 2% target for inflation.
The PPI release serves as an appetiser for Wednesday's reading on consumer prices. July's retail sales reading, a key indicator of the health of the US consumer, is set to follow on Thursday.
Total UK pay growth came in at 4.5%, a significant drop compared to last month. The fall is partly due to the annual figure being compared to a period which includes last June when one-off bonuses for NHS workers were paid.
The latest figures remain above levels consistent with a 2% inflation target — one of the Bank of England's closely-watched metrics when deciding on the interest rate path.
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Tech stocks take the lead on Wall Street
Chris Beauchamp, Chief market analyst at online trading platform IG said:
“It feels like ‘back to normal’ for markets as tech stocks lead the way higher again following the lower US PPI data. The reading has given heart to beleaguered investors, who remain skittish after last week’s volatility. Setting aside the carnage in the yen and the Nikkei, last week feels very much like a normal pullback in an otherwise strong year, and recession fears, like expectations of a more dramatic cut in rates, have been dialled back over the past few sessions.”
Trending tickers: Nvidia
Nvidia shares are up this afternoon, despite having been trending around 1% lower in premarket.
The company's share price got a boost from news that the graphics processing unit (GPU) frontrunner had signed a new AI training deal with the state of California.
The artificial intelligence (AI) darling's shares took a hit recently amid growing concerns about a broad economic slowdown. The stock also took a dive last week on news of a delay for the company's next-generation AI processor.
However, Bank of America analysts called the stock a top pick and UBS indicated that the Blackwell chip delays may be less significant than initially thought.
UBS analysts said they expect the artificial intelligence chip shipments to be delayed four to six weeks, rather than the three-month delay first reported. The investment bank said such a delay would be "invisible to most, if not all, end customers."
The stock is up about 120% this year, though off highs seen earlier this summer.
How stocks are faring at the US opening bell
UK grocery prices tick up in August
The price of the average grocery basket has risen for the first time since March 2023. (Oscar Wong via Getty Images) New data has shown that the price of the average grocery basket has risen for the first time since March 2023, with supermarket prices 1.8% higher than a year ago over the month to August 4, nudging up slightly from 1.6% in July.
The data from Kantar said the increase follows 17 straight months of falling rates from a peak of 17.5% to its lowest point since September 2021 in July.
While products across 89 categories fell — such as kitchen towels and baked beans, down 7% and 5% respectively — prices rose across 182 product categories.
Trending tickers: Trump Media
Here's one from Yahoo Finance UK's Pedro Goncalves:
Shares in Trump Media and Technology Group were up about 1.5% in pre-market trading after falling more than 5% on Monday, after the company reported a net loss in its first full quarter as a public company.
Even though Trump Media is valued at $5bn (￡3.9bn), the Truth Social owner revealed it made just $837,000 in revenue last quarter. That marks a 30% drop from the year before. The company lost another $16.4m during its first full quarter as a public company.
Shares bounced back ahead of the market opening as Trump sat down for a two-hour interview with billionaire Elon Musk on X.
The former president returned to the social media platform just hours ahead of the conversation. The last time Trump had posted on his X account was 24 August, 2023.
During the interview, Trump congratulated Musk for his willingness to fire workers demanding better conditions. "You're the greatest cutter," Trump said. "I mean, I look at what you do. You walk in, you just say: 'You want to quit?' They go on strike – I won't mention the name of the company – but they go on strike. And you say: 'That's okay, you're all gone.'"
The Republican presidential candidate also awkwardly commented that Democrat rival Kamala Harris looked “beautiful” on the new cover of Time magazine and “very much like our great first lady, Melania”.
Pound strengthens following employment data, but MPC will still be cautious: commentary
The pound is looking stronger this morning against both the dollar and the euro following the ONS employment print.
Matthew Ryan, head of market strategy at global financial services firm Ebury said:
“The June UK labour report is consistent with a jobs market that remains remarkably tight. The unemployment rate provided the biggest surprise, as this actually fell to a four-month low after economists were bracing for a modest uptick to mid-2021 levels. Wages are also continuing to expand at a fast pace, particularly once bonuses are excluded. This will be a nagging concern for Bank of England officials, as elevated earnings growth presents one of the biggest challenges to achieving the 2% inflation target in a sustainable manner.
“We are increasingly confident that the MPC will adopt a cautious approach to its cutting cycle, particularly in light of the solid performance of the labour market and elevated price pressures in the UK’s dominant services sector. Swap markets are pricing in around a one-in-three chance of another rate reduction in September, but we are very happy in our call that the BoE will wait until November, with additional cuts to follow on a quarterly basis. The growing likelihood of a gradual easing cycle is supporting the pound this morning, which has edged back above the 1.28 level on the US dollar.”
German ZEW survey data drops
It's quite a lot lower than forecasts... Here's the data:
German ZEW Survey expectations Aug: 19.2 (est 34.0; prev 41.8)
- ZEW Current Situation Aug: -77.3 (est -74.5; prev -68.9)— LiveSquawk (@LiveSquawk) August 13, 2024
And here's what the DAX is doing:
FTSE loses steam
The FTSE started off strong this morning but has lost steam, now trading almost flat. Here are the stocks bringing up the rear:
Data Hargreaves Lansdown Not face value: King Charles bank notes sell at auction
Banknotes featuring a portrait of King Charles III, first issued in June 2024 by Bank of England, UK (Alexey Fedorenko) A story for a slow August news day:
A Bank of England auction of new King Charles bank notes raised ￡914,127 for charity, selling the cash for more than 11 times their face value.
The new ￡5, ￡10, ￡20 and ￡50 notes, featuring King Charles III, were put to auction and are deemed valuable by numismatists due to their low serial numbers.
A ￡10 note with the serial number HB01 000002 sold for ￡17,000 during bidding, while a sheet of 40 connected ￡50 notes — with a face value of ￡2,000 — sold for ￡26,000.
'More to do' in supporting employment, says Rachel Reeves
Chancellor Rachel Reeves (Pool via Reuters) (Reuters / Reuters) Chancellor Rachel Reeves said of today's employment data:
"Today’s figures show there is more to do in supporting people into employment because if you can work, you should work.
“This will be part of my budget later in the year where I will be making difficult decisions on spending, welfare and tax to fix the foundations of our economy so we can rebuild Britain and make every part of our country better off
BoE to keep 'watchful eye' on wage data: PwC
Gora Suri, economist at PwC said:
Though CPI inflation is back to target and the rate-cutting cycle has begun, the Bank of England will continue to keep a watchful eye on pay growth as it is highly correlated with services inflation. According to the latest Bank of England Decision Maker Panel survey, expected year-ahead wage growth is currently 4.1%, suggesting it may take time for wage pressures in the economy to fully dissipate.
Will wage data be a head scratcher for the BoE?
Here's Alice Haine, personal finance analyst at Best Invest's take:
“The good news for households is that pay packets are still stretching further than they did a year ago, giving household budgets some much-needed wiggle room after a challenging couple of years though the rising tax burden - a result of frozen or cut personal tax thresholds - means more workers will find themselves subject to higher rates of tax as their pay increases.
“The Bank of England, however, is likely to be concerned by better-than-expected unemployment rate and the strong real wage data as it signals that tightness in the labour market is persisting. This may affect whether they push ahead with a second rate cut next month as it will want to ensure any lingering inflationary forces are truly eradicated from the economy first.
“Many households will have been buoyed by the first interest cut at the start of this month – particularly borrowers with heavy debts and large mortgages - but those banking on a second cut as early as September may have their hopes dashed. UK inflation is expected to rise for the first time this year when the next round of data is released tomorrow as favourable base effects from last year’s lower energy bills fade out of the annual calculations.
Again, this may make central bank policymakers wary about going ahead with another rate reduction as soon as next month though the hope of more rate cuts this year remains."
UK wage inflation cools
Here's our Pedro Goncalves on UK wage data: UK wage growth cools to two-year low as unemployment rate dips unexpectedly
The top lines are:
UK wage growth slowed to the lowest rate in almost two years in the three months to June despite an unexpected fall in the unemployment rate, according to official data.
Average earnings excluding bonuses slowed to 5.4% from 5.8% in the three months to June and was 2.4% higher after taking inflation into account, said the Office for National Statistics.
This figure marks the slowest pace of growth since the summer of 2022.
Annual pay growth including bonuses slowed to 4.5% from 5.7% over the same period, in part due to one-off payment to NHS staff in June 2023 that was not repeated this year.
Overnight in Asia
The Nikkei (^N225) was the winner in Asian trading hours on Tuesday morning, rising 3.4% in the session as it got a further leg up from last week's wobble. The index is now trading above 36,000 ahead of key CPI data which will give some more direction to sentiment around the world.
Over in Hong Kong, the Hang Seng (^HSI) ticked up 0.1% and the SSE Composite (000001.SS) fell 0.2%.
And here's what US stock futures are doing
Monday trade in the US
From our US colleagues:
US stocks closed mixed on Monday as Wall Street braced for a week full of key economic data signals.
The benchmark S&P 500 (^GSPC) hugged the flat line while the tech-heavy Nasdaq Composite (^IXIC) rose about 0.2%. Meanwhile, the Dow Jones Industrial Average (^DJI) dropped roughly 0.4%, or less than 150 points.
In single stock moves, Nvidia (NVDA) finished the day about 4% higher, sparking a rally in the tech sector.
Wall Street is coming off a whipsaw week that has left markets jumpy and "on edge." Though the major indexes practically ended last week where they had started, it didn't come without volatility throughout the week.
Strategists say that is likely to continue — and this week comes with plenty of opportunities. Wednesday provides a fresh look at the state of inflation with the latest release of the Consumer Price Index. Then Thursday comes with two key signals on the state of the US consumer: a reading on July's retail sales and Walmart (WMT) earnings.
Good morning!
Hello from London. Lucy Harley-Mckeown here to bring you the business and markets news of the day.
So far this week all eyes have been trained on US and UK CPI data due to drop on Wednesday. Earlier this morning we had UK wage growth data, which showed pay inflation had dipped to a two-year low and will give some solace to the Bank of England.
10am is Germany's latest ZEW index data.
1.30pm we can expect the US PPI.
Let's get to it.