By Lars Mucklejohn
London’s FTSE 100 ticked down on Monday amid a deluge of economic data that spurred traders to trim their bets on UK interest rate cuts.
The bluechip index closed 0.04 per cent lower at 7,612.86, while the FTSE 250, which is more aligned with the health of the UK economy, dropped 0.80 per cent to 19,018.55.
Latest figures from theOffice for National Statistics (ONS) suggested that the unemployment rate has been falling over the past few months, in a sign of the continued tightness of the UK’s labour market.
Previous “experimental” estimates, which used up-to-date administrative data, put the unemployment rate in the three months to November at 4.2 per cent.
Coming just a week after the Bank of England opened the door to interest rate cuts later this year, analysts argued that the data would likely lead the Bank to hold on longer before cutting interest rates.
Gilt yields rose after the chair of the US Federal Reserve, Jerome Powell, said on Sunday that he still expected to make three 0.25 per cent interest rate reductions this year, despite markets betting on six cuts. The Fed pencilled in these cuts in December.
Powell said that “nothing has happened in the meantime that would lead me to think that people would dramatically change their forecasts”.
The pound dropped to its lowest level against the dollar in two months as traders trimmed their bets on UK interest rate cuts.
UK services activity rose at its fastest rate in eight months, according to S&P Global’s purchasing managers’ index (PMI). The surge in business activity and new orders has led to an increase in hiring across the sector.
The OECD warned today that central banks should not cut interest rates too early or risk inflation staying above the two per cent target for an extended period of time.
In its latest economic outlook, the Paris-based organisation expected inflation in the UK to average 2.7 per cent in 2024 before falling to 2.4 per cent next year.
“The mood in Europe hasn’t been helped by further evidence of weak demand in the services sector, with softer PMI numbers from Germany and France, while German import and export numbers for December slowed sharply indicating that Europe’s largest economy is probably in recession,” said Michael Hewson, chief market analyst at CMC Markets.
Telecoms giant Vodafone said its total revenue shrank by over two per cent in the third quarter due to contractions in Italy and Spain and sluggish growth in Germany, its biggest market.
The firm reported a 2.3 per cent drop in revenue to €11.37bn (£9.7bn) over the third quarter, down from €11.63bn (£39.9bn) in the same period last year. Shares fell 3.3 per cent.
CMC Markets, founded by Tory peer Lord Peter Cruddas, has stuck to the upgraded guidance it issued at the end of last month but has announced plans to cut more than 200 jobs in a bid to save £21m. Shares soared 18 per cent.
Lloyds and Santander have provided bank accounts to holding companies linked to a state-backed Iranian petrochemicals company which has been under western sanctions since 2018, according to the Financial Times. Lloyds shares fell one per cent, while Santander dropped four per cent.
The founder and former chief of Revolution Beauty will have to pay close to £3m to the scandal-stricken makeup brand to settle allegations he breached fiduciary duties to the company. Shares rose 1.7 per cent.
Commercial property firm Land Securities, utility company National Grid and pharmaceutical giant GSK rose on the back of broker upgrades.
Loss-making Naked Wines has named its new chief executive four months after its former boss Nick Devlin stepped down amid a challenging period for the company.
