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9.30pm: Wall St higher as US inflation hits forecast
Wall Street investors responded positively to inflation data and banks bounced back after a weekend of turmoil over the failure of two specialist lenders.
February’s consumer price index report revealed the cost of living in the US continued to ease last month, signalling a less aggressive approach to interest rate rises.
First Republic shares surged 27%, a day after falling 62%, as regional banks clawed back some of the heavy losses in the previous session’s SVB-fuelled sell-off. JP Morgan Chase and Goldman Sachs were also higher.
Regulators are handling the fallout of the failure of SVB and Signature. Having taken control of SVB last week, the Federal Deposit Insurance Corporation is looking at sales of its assets.
At the close, the Dow Jones Industrial Average was up 1.06%, easily reversing losses recorded in the previous session, while the S&P 500 advanced 1.65% and the Nasdaq Composite saw out the session 2.14% firmer.
In London the FTSE 100 closed 88.48 points higher at 7,637.11.
Headline US CPI rose 6% year-on-year in February (consensus: 6%), compared to 6.4% in January.
The inflation data was released a week before the Fed begins a two-day policy meeting. Fed Chair Jerome Powell last week said the US central bank would likely need to raise rates by more than expected, leading financial markets to expect that a half-percentage-point rate increase was on the table next week.
Those expectations have been dialled back to 25 basis points on recent data and following the collapse of two regional banks.
Investors believe these developments will dampen enthusiasm for aggressive interest rate hikes.
Nathaniel Casey, Investment Strategist at Evelyn Partners, said: “As inflation continues to remain elevated, more work will likely be required to restore price stability. However, the recent events in the banking sector will signal to the Fed to tread cautiously when implementing additional monetary policy tightening.”
James Bentley, director of Financial Markets Online, said: “Today’s inflation readings came in bang on expectations and thus brought no further clarity to the fog of confusion that now surrounds the Federal Reserve’s next interest rate move.
“Less than a week ago the Fed Chair Jerome Powell made clear that he wouldn’t hesitate to hike interest rates aggressively to purge inflation from America’s economy.
“With inflation still falling too slowly for Mr Powell’s liking, a big interest rate rise should by rights be on the cards at next week’s Fed policy meeting.
“But in the space of just a few days the brakes have been slammed on the monetary tightening juggernaut. Ho-hum jobs data and the collapse of two US banks, which required emergency measures to shore up confidence in America’s banking system, are forcing the Fed into a rapid rethink.
“So much so that some market watchers are now betting that next week won’t just bring a smaller rate rise than first thought – it may bring none at all. In response, banking stocks and the Dollar are in full retreat.”
7am: UK unemployment falls, as do vacancies
The UK unemployment rate came in at 3.7% in the three months to January and remains very low by historical standards.
The number of jobs on offer fell by 51,000 between December and February, latest figures indicate.
Despite the drop, the number of job vacancies remains high at 1.1 million and the Chancellor wants to encourage more economically inactive people back into the workforce.
However, figures from the Office for National Statistics show economic inactivity continued to fall in November to January to 21.3%, down by 0.2 points.
The unemployment rate in Scotland fell to a new record low of 3.1%, which is 0.2% points down on the previous three months.
Regular pay which excludes bonuses grew by 6.5% in November to January. Private sector workers saw a 7% average pay lift, while the public sector was at 4.8%. For the public sector this is the highest growth since early 2006.
Chancellor Jeremy Hunt said: “The jobs market remains strong, but inflation remains too high. To help people’s wages go further, we need to stick to our plan to halve inflation this year.
“Tomorrow at the Budget, I will set out how we will go further to bear down on inflation, reduce debt and grow the economy, including by helping more people back into work.”
7am: Centrica extends nuclear life
Centrica plans to extend the lives of the Heysham 1 and Hartlepool nuclear power stations, which are now expected to close in March 2026, two years later than previously forecast.
These extensions are expected to add 6TWh to Centrica’s electricity generation volumes between 2024 and 2026 which equates to around 70% of Centrica’s total nuclear volumes in 2022.
Chris O’Shea, Centrica group chief executive, said: “We’ve been able to work with EDF to strengthen the UK’s energy security by extending the life of these critical power stations.
“This continues our action to bolster security of supply in our core markets which includes reopening the Rough gas storage facility in the UK, sanctioning new gas-fired electricity generation capacity in Ireland, and securing increased volumes of gas and renewable power for our customers.
“We will continue to focus on supporting energy security in our core markets during these uncertain times.”
7am: Smart Metering Systems
Smart Metering Systems, which installs and manages smart meters, energy data, grid-scale battery storage and other carbon reduction assets, saw a near-doubling of profit to £16 million (£8.3m) for the year to the end of December.
Underlying profit before taxation up 34% to £24.5m (2021: £18.3m).
Global markets
On Wall Street, the Dow Jones fell 0.28%, but, the tech-heavy Nasdaq 100 rallied 0.45%.
Despite efforts by the US government to shore up confidence in the banking system investors heavily punished regional banks on Monday. Shares in Western Alliance (-47%) and First Republic (-62%) were a couple of the standouts.
UK markets also scaled back their bets on a Bank of England rate hike in March, with a 60% chance of a quarter-point rate hike now seen this month, down from around 90% last week.