BUSINESS LIVE: US inflation higher than forecast; M&S wins Christmas crown; Tesco increases forecasts

Neil Wilson, chief market analyst at Finalto, said:

‘In short: you will not get an interest rate cut in March. It’s the kind of text that conveys that the Fed doesn’t have to rush to cut spending this quarter. Disinflation will not be linear and we think the Fed will be quite (perhaps overly) cautious in easing in these circumstances. It will take much, much longer to reach the target – if at all – and the market is on the wrong side of this reality.

Markets have moved up after the CPI to reduce bets on a March rate cut and the overall amount of easing this year… we’ve always said the FOMC response after December was far too long and this is now reverting to the mean …while we’re still a bit unsure about where the Fed’s response function currently stands – could it be unusually proactive this time? That is unknown, but it seems unlikely that this is what the market has priced. Stock futures sold off a bit, while the Dow Jones hovered around 200 points. USD is trading firmer with front-end returns.”

Seema Shah, chief strategist at Principal Asset Management:

‘Today’s inflation report reinforces the idea that the market has become a bit over-enthusiastic around the timing of rate cuts.

‘These are not bad figures, but they do show that disinflation is still slow and unlikely to fall in a straight line to 2%.

“Certainly, as long as inflation remains stubbornly high, the Fed will continue to resist the idea of ​​imminent rate cuts. But while the market was likely over-enthusiastic in its initial expectations, the stars should finally align on Fed cuts – likely around mid-year.”

New data shows that the overall US CPI rose 3.4 percent year-on-year in December, higher than forecasts of a 3.2 percent increase. On a monthly basis, the CPI rose 0.3 percent, while a gain of 0.2 percent was expected.

The core CPI, which excludes volatile items such as food and energy, rose 3.9 percent year-on-year, compared with forecasts of a 3.8 percent increase.

Ten-year government bond yields are at 4.026 percent and little changed on the day, while two-year yields rose to 4.379 percent.

Taylor Wimpey has warned that the near-term outlook for the UK housing market remains uncertain, amid an ‘extremely challenging’ environment for planning approvals.

The group, striking a cautionary tone ahead of the key spring selling season, has seen sales prices rise over the past year and told investors on Thursday that lower mortgage rates had boosted demand levels in early 2024.

FTSE 100-listed Taylor Wimpey reiterated its 2023 operating profit outlook, but noted it had entered the current financial year with a smaller order book.

One of Donald Trump’s luxury golf courses in Scotland has finally turned a profit, but another remains firmly in the red.

Trump Turnberry in Ayrshire, which has three corridors and a hotel, has been loss-making since the former US president bought it for almost £50 million in 2014.

Chris Beckett, head of equity research at Quilter Cheviot:

‘Tesco and M&S have followed up Sainsbury’s relatively positive Christmas update with their own festive touch. They have both achieved good results and are gaining market share. With Sainsbury’s claiming the same, private equity-backed supermarkets Asda and Morrisons are still left to suffer and not enjoy the same positivity.

‘Interestingly, we see a good picture of the British consumer in the results. M&S sees its food range doing very well, up 18%, while Tesco saw its Finest range rise 17%. Both ranges are likely to compete with each other on price and so you see a consumer who is willing to spend a little extra, especially on special occasions.

‘We also see a return to growth for online shopping after normalization after Covid-19. Both Tesco and M&S saw double-digit growth in food and clothing here, so it will be interesting to see if this is matched by others, such as Ocado, or if it is a stock-specific story.

‘For investors, both companies are not particularly expensive and have had good years in 2023. Tesco has explicitly upgraded the guidelines, while M&S has suggested a minor upgrade but has subsequently been treated more harshly by the market. These results essentially complete the turnaround story, and given how much the stock price has risen over the past year, investors may use these results as a moment to take some profits.”

The US securities regulator has finally given the green light to the launch of exchange-traded funds that track the price of Bitcoin, marking a turning point for crypto assets.

The Securities and Exchange Commission on Wednesday approved the launch of 11 Bitcoin ETFs, featuring funds from Wall Street giants BlackRock and Fidelity, as a long-running regulatory saga nears its end.

It’s been a tough year for Bitcoin. Since the collapse of FTX, the leading cryptocurrency has failed to reach the dizzying heights it reached in 2022.

Tesco is on course for better-than-expected profits this year after record sales over the Christmas period.

Tesco expects retail adjusted operating profit of £2.75 billion for the year, compared with a previous range of £2.6 billion to £2.7 billion.

Bosses at the supermarket giant say growth was boosted by investments to keep prices low, as the company joins rivals in efforts to prevent consumers switching to fast-growing German discount rivals Aldi and Lidl.

Marks & Spencer Group sales exceeded high expectations during the key Christmas period as groceries and women’s clothing saw a surge in demand.

The retailer’s like-for-like sales rose 8.1 percent in the thirteen weeks to December 30, while food sales growth exceeded expectations by 9.9 percent, and clothing and home sales grew by 4. 8 percent rose – well above expectations of 2.8 percent.

Boss Stuart Machin said M&S had led the food market with volume growth of around 7 percent in each month of the quarter, serving “more customers than ever before”, while womenswear was “the most notable, with growing volume and a significant lead on the market. ‘.