Traders today got some respite after last night’s big sell-off on Wall Street as the UK’s annual inflation rate fell to 9.9%.
The tech-focused Nasdaq took a 5% dive yesterday after US inflation fell to a lower-than-expected 8.3%, raising hopes of another big hike in interest rates next week.
Today’s drop in UK inflation was due to petrol prices falling below 10.1% last month, but economists still expect a peak of around 11% later this year.
Home prices in London hit record high
London home prices have hit a new record high, despite the growing burden of rising mortgage bills and rising inflation.
According to the latest data from the Land Registry, the average cost of a house in the capital rose more than 9% to £543,517 in July. Prices in the capital have not risen sharply since July 2016.
The increase means that homeowners have seen the value of their bricks and mortar increase by an average of over £45,000 a year.
However, London was still the region with the slowest rising prices. Britain’s growth rate was 15.5% while England’s house prices increased by 16.4%. The Southwest was the fastest growing region with an annual growth of 20.7%.
Nationally, prices were rising at their fastest rate since May 2003, although the ONS cautioned that the year-on-year figure showed a slight decline in prices at the end of the stamp duty holiday a year earlier.
The biggest increase in London was in Harrow, where prices increased by 14%, from an average of £546,597.
FTSE 100 widens losses, Dunlam 4% higher after results
BP and Shell are among today’s major losers as the FTSE 100 index weakened last night on Wall Street bearish.
The energy giant lost 1% after oil prices fell on fears that interest rates too high to curb inflation would stifle global demand.
The FTSE 100 index fell 0.9%, or 67.11 points, to 7318.75 today after losing 1.2% last night. A weak pound’s support for overseas earnings stocks limited some of the losses after Wall Street’s worst session in two years.
Other big losers included asset management business Aberden, which fell from 6.45p to 142.75p as Deutsche Bank lowered its target price to 135p.
The FTSE 250 index fell 0.7%, or 140.88 points, to 19,026.33, with shares of EasyJet and Wiz Air falling more than 3%. Homeware chain Dunlam rose 4%, or 27.5p to 750.5p, after reporting strong current trading alongside its record annual results.
Despite the fall in petrol prices, inflation remains at its peak
Economists have warned that inflation is still peaking, despite the annual consumer price index (CPI) rate falling to 9.9% in August from 10.1% the previous month.
The CPI decline was due to a 6.8% month-on-month decline in fuel prices, offset by a further rise in food price inflation to 13.4 percent and an increase in clothing price inflation.
An increase in the average energy price range to £2,500 next month means Capital Economics expects a CPI peak of 11% later this year.
The consultancy also highlighted today’s growth momentum in services inflation, which rose to 5.9% and means core CPI inflation remained at a 30-year high of 6.3%.
UK Chief Economist Paul Dales said: “We expect CPI inflation to be around 11% just before the end of the year and core inflation to continue at higher levels.
“This means the bank will have to raise interest rates from 1.75% to 3%, if not more.”
FTSE 100 under pressure, dollar strengthens
Wall Street ended its worst session since June 2020 last night, with the tech-focused Nasdaq down 5% as US inflation data shook investor confidence.
The annual inflation rate of 8.3% was lower than expected, fueling hopes of a 0.75% increase in US interest rates by the Federal Reserve next week. Some traders are even talking about the possibility of an increase of 1 per cent.
With base prices being higher than expected, it is also feared that higher rates will be required for a longer period of time.
Federal Reserve Chairman Jerome Powell has already made it clear that the central bank will continue raising rates until there is clear evidence that inflation is on a permanent downside.
Fears of a resultant impact on the global economy were reflected in Wall Street’s biggest one-day fall in two years, with the Dow Jones Industrial Average down 4% and the S&P 500 up 4.3% after four sessions of gains.
Selling pressure continued in Asia markets after the Nikkei 225 fell over 2% and the FTSE 100 index today closed 50 points lower at 7,335, according to CMC Markets.
London’s top flight fell 1.2% yesterday, with consumer-focused and retail the hardest hit.
The US dollar strengthened on expectations of a more aggressive rise in US interest rates, forcing sterling to reverse this week’s gains to less than $1.15. Oil prices remained stable today with Brent crude at $93 a barrel.
Credit: www.standard.co.uk /