FTSE lower, Wall Street up as UK inflation to drop below 2%

The FTSE 100 closed 0.4% down on the day, the CAC was 0.1% lower, and the Frankfurt DAX was flat

European stock markets were largely on the back foot on Wednesday despite news that UK inflation is forecasted to drop to the Bank of England’s 2% target this spring, in a welcome boost to mortgage holders.

In London, the FTSE 100 closed 0.4% down on the day, while the CAC was 0.1% lower in Paris, and the Frankfurt DAX was flat as bearish sentiment remains ahead of key macro data.

The STOXX 600 slid 0.2%, with healthcare and utility shares the worst performers so far.

In the US, the S&P 500 added 0.15% by the time of the European close, while the tech-heavy Nasdaq was up 0.3%. The Dow Jones advanced 0.1% in New York.

As per Deutsche Bank, UK CPI inflation will average 2.5% year-on-year in 2024, down from a previous prediction of 2.7%. Headline inflation will drop “a little below 2% in April and May”, before hovering near 2-2.5% for the remainder of the year.

Chief UK economist Sanjay Raja, commented: Core CPI, we think will slow to just below 4% year-on-year, with services inflation tracking just above 5% y-o-y. RPI, we think, will decline to 3.5% year-on-year on the year.

In the meantime, the BoE governor gave no further signals regarding the path of interest rates as he reaffirmed the need to bring inflation lower. Andrew Bailey told MPs from the Treasury select committee on Wednesday that it is important for the UK to return to 2%.

Elsewhere, the price of Bitcoin (BTC-USD) soared by $1,000 last night, before declining moments later, after a fake tweet that the US SEC had approved bitcoin ETFs.