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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

FTSE 100 hit record closing high; US inflation slows slightly to 6.4% – as it happened

United States United Kingdom Inflation Office for National Statistics
The London Stock Exchange.
The London Stock Exchange. Photograph: Neil Hall/Reuters

Closing post

Time to wrap up; here are today’s main stories:

FTSE 100 hits record closing high

Valentine’s Day is a time for flirting. But after eyeing up the landmark 8,000 point level today, the FTSE 100 index of blue-chip shares couldn’t quite make it.

Instead, the FTSE 100 has closed just 6 points higher at 7953.85 points, which is a new closing high. We also saw a new intraday high this morning, of 7996 points.

Stocks couldn’t hold those earlier gains, after US inflation didn’t cool as much as expected in January.

Sheldon Lyn, partner at McKinsey & Co, says inflation will continue to influence spending:

“CPI results continue to deliver a mixed bag, up 0.5% in January month-over month after a 0.1% increase in December. From a consumer perspective, we anticipate these still elevated numbers will continue to shape spending decisions – be it a sustained shift to lower priced alternatives, deal hunting, or making choices to defer certain big-ticket purchases.

Last year, we saw consumers taking an “all of the above” approach as the reality that inflation wasn’t transitory set in.

Coca-Cola HBC, the bottling firm, was the top FTSE 100 riser – gaining 5%. It was followed by Vodafone, which rose 3.4% after US cable company Liberty Global took a 5% stake.

Another telecoms group, BT, was the third-highest rise, up 3.1%.

Michael Hewson, analyst at CMC Markets, explains:

The FTSE100 has continued to make new record highs today coming to within touching distance of the 8,000 level, before slipping back after US CPI came in slightly hotter than expected.

The telecoms sector helped to drive today’s move to new highs at 7,996 after Liberty Global announced it had taken a 4.9% stake in Vodafone, saying that the recent share price declines meant that the business was undervalued.

This has also translated into gains for the wider sector with BT Group also higher, given that it has been subject to stake building from outside investors, with Altice being one of the biggest.

Updated

Sandwich chain Subway to explore sale

Sandwich chain Subway has put itself up for sale.

Subway has announced it is exploring a possible sale of the company, and has engaged JP Morgan to advise it and to conduct the sale exploration process.

Subway, which sells submarine sandwiches, wraps, salads and drinks, added:

The management team remains committed to the future and will continue to execute against its multi-year transformation journey, which includes a focus on menu innovation, modernization of restaurants and improvements to its overall guest experience.

The company recently announced another record-setting year, ending 2022 exceeding global sales projections and achieving eight consecutive quarters of positive same-store sales growth.

Updated

Over in Strasbourg, the European Parliament has approved a law to effectively ban the sale of new petrol and diesel cars in the European Union from 2035.

MEPs backed the plan, which aims to speed up the switch to electric vehicles and combat climate change.

Under the new rules,carmakers must achieve a 100% cut in CO2 emissions from new cars sold by 2015, making it impossible to sell new fossil fuel-powered vehicles in the EU.

Supporters of the car bill argue it gives European automakers a clear timeframe to switch production to electric vehicles, and will spur investment at a time when Europe is competing with the US and China in the green technology space.

The ban will also help the EU achieve its goal of becoming a “climate neutral” economy by 2050.

The UK is moving faster, though, with plans to ban the sale of new petrol and diesel cars by 2030.

Economists and investors continue to analyse the US inflation report for January.

John Lloyd, Lead, Multi-Sector Credit Strategies at Janus Henderson, says the report is consistent with predictions of two more quarter-point rate increases in US interest rates.

Lloyd explains:

The Core CPI report came out relatively in line with consensus at 0.4% m/m. Shelter continues to remain sticky at 0.7% m/m; however, the market expects shelter to start trending down based on more real time rental indexes. Core Services less Shelter which has been the Federal Reserves recent focus as they monitor wage inflation was down slightly at 0.3% m/m and should be perceived positively.

We also had the Bureau of Labor Statistics this week update their seasonal adjustment factors for CPI, which erased much of the Q4 inflation slowdown. We are currently at 4.6% three month annualized and 6.5% six month annualized core inflation rates. So, if the rate of decline of inflation stays the same, it will take longer to reach the Federal Reserve target of 2% inflation with these revisions. This would support the case for higher Federal Reserve rates for a longer time period.

Today’s data should not materially change the Federal Reserve’s case for at least two more 25 bps rate increases which is currently priced in the forwards market.

Back in the City, the FTSE 100 index is having another crack at the 8,000-point mark.

The index has now risen back to 7991 points, close to the alltime intraday high of 7996 set this morning….

January’s inflation report will have given the US Federal Reserve heartache on Valentine’s Day, says Diane Swonk, chief economist at KPMG US.

She suspects the small drop in annual inflation could spur the Fed into a half-point rate increase at its next meeting, rather than a smaller, quarter-point rise.

UK bond prices have weakened following the higher-than-expected US inflation reading fro January.

Yields on British two-year government bonds have hit their highest level since October 21, Reuters reports, which was the day after Liz Truss said she would quit as prime minister.

Yields move inversely to prices, and measure the rate of return on the bond.

The yield on two-year gilts hit 3.803%, their highest since October 21 and a jump of about 16 basis points on day, rising by more than yields on U.S. and German government bonds.

A street sign for Wall Street.
A street sign for Wall Street. Photograph: Andrew Kelly/Reuters

Wall Street has opened with a bit of a bump.

Technology stocks, which are vulnerable to higher interest rates, are weaker, pulling the Nasdaq Composite down by 0.7%.

The Dow Jones industrial average, of 30 large US companies, has dipped by 219 points or 0.65% to 34,026. Apple have dropped by 1.4%, with Intel losing 1.2%.

The dollar is now picking up in the foreign exchange markets, up 0.2% against a basket of currencies.

That suggests traders have ratcheted up their expectations for US interest rates, as the Federal Reserve tries to cool inflation.

Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, explains:

“The latest slightly above consensus CPI release showed inflation momentum remaining strong as the pace of decline in the speed of disinflation slowed. Core services ex shelter inflation (the Fed’s new preferred measure) was affected by an outsized drag from medical care services, but other categories remain firmly above target and not yet responding meaningfully to the tightening the Fed has delivered so far.

“With a super-hot labour market leading to the risk that inflation becomes sticky again, we think Fed is likely to up its hawkishness to bring inflation down towards the target.”

FTSE drops away from record levels

The FTSE 100 has sunk back from its earlier record high of 7996 points, and is now up just 8 points at 7955.

Hopes of an early pause to central bank monetary tightening have taken a knock from the higher-than-expected US inflation report. We may not see the sunlit uplands of 8,000 points today after all.

James Bentley, director of Financial Markets Online, sums up the mood:

“America’s inflationary dragon is far from slain. While today’s CPI numbers came in largely on expectations, many marketwatchers are disappointed at just how sticky US inflation has become.

“Amid all the post-data headscratching, two things were clear. US inflation is heading in the right direction, but too slowly for the Federal Reserve’s liking. And as a result no-one should expect a doveish takeover in the Fed any time soon.

Updated

Jason Furman, the former director of Barack Obama’s National Economic Council, is concerned about core US inflation:

US inflation report: What the experts say

The year-on-year US inflation figures are not looking good, warns Neil Birrell, Chief Investment Officer at Premier Miton Investors.

Core inflation is higher than expected and we may have seen a pause in the improvement that we have been hoping for.

The outlook remains clouded by the uncertainty over inflation and resultant policy action. This might have all been priced in the short term, but it’s the longer term that should be the concern.”

The 0.5% m/m increase in consumer prices in January illustrates that US inflation is “still declining only gradually”, says Andrew Hunter, chief US economist at Capital Economics.

But… Hunter does still expect that downward trend to accelerate soon, as easing goods shortages feed through and housing inflation starts to turn down.

He says:

The headline index was boosted by a 2.0% m/m rebound in energy prices, but that partly reflects a strong rise in household utilities prices, which is very hard to square with the recent plunge in natural gas spot prices.

Core prices rise by a slightly smaller 0.4% m/m, with a 0.1% rebound in core goods prices offsetting a slower gain in core services, which rose by 0.5%. The former came despite a further 1.9% m/m decline in used vehicle prices, and instead mainly reflected a 0.8% gain in clothing prices, a 0.5% rise in household furnishings prices and a 2.1% rise in prescription drug prices. With the surveys continuing to suggest that global goods supply chain shortages are fading rapidly, we suspect it’s only matter of time before core goods prices resume their decline.

Tom Kremer, senior macro strategist at Quintet Private Bank, says US inflation continues to be on a downward trend, but the decline may not be quite as fast and smoothly as markets had come to anticipate in recent months.

Kremer explains:

Having said that, shelter inflation in particular will become a supporting factor later in the year once the observed declines in rents feed through to the official inflation measure, while base effects should also turn favourable as last year’s large increases in spring and summer fall out of the calculations.

While today’s data was somewhat disappointing for those hoping for a rapid normalisation in inflation pressures, we don’t think it fundamentally changes the outlook for the Federal Reserve. We look for the Fed funds rate to peak just above 5% in spring, followed by long pause as policymakers wait for evidence that underlying price pressures – particularly in core services – are moderating more sustainably alongside a rebalancing in the labour market.

Full story: US inflation eases again for seventh consecutive month

Inflation continued to cool in the US in January, rising at an annual rate of 6.4%, according to figures released on Tuesday by the Bureau of Labor Statistics, our US business editor Dominic Rushe reports.

The consumer price index (CPI) – which measures a basket of goods and services – has now fallen for seven consecutive months, down from a four-decade high of 9.1% last June and down from an annual rate of 6.5% in December.

On a monthly basis, prices rose 0.5% from 0.1% in December, showing the continuing strength of inflationary pressures as the cost of shelter rose again.

The fall was smaller than some economists had expected, however, January’s rise was still the smallest 12-month increase since the period ending October 2021. After subtracting volatile food and energy prices, the so-called “core index” rose 5.6% over the last 12 months, its smallest 12-month increase since December 2021.

Here’s the full story:

Over the past year, the cost of food to consume at home has jumped by 11.3% in America.

Today’s inflation report shows that the index for cereals and bakery products rose 15.6 percent over the 12 months ending in January.

Fruit and vegetable prices are up 7.2% over the year, while dairy and related products cost 14% more.

Eating out is also much pricier, with the index for food away from home up 8.2% over the last year.

There were also wild swings in the bond market:

We promised you volatility in the markets when the US inflation report was released – and the pound did not disappoint.

Sterling had been trading around $1.22 before the CPI data hit the wires – it promptly slumped to $1.215, before immediately retracing its steps and soaring over $1.226.

The pound is now back to $1.221, presumably feeling a little queazy.

The pound vs the US dollar, 14th February 2023
The pound vs the US dollar, 14th February 2023 Photograph: Refinitiv

Neal Keane, head of sales trading at the international brokerage ADSS, says the CPI report shows that the battle from inflation has hit headwinds.

“US CPI holding relatively flat at 6.4% shows that the Fed’s fight against inflation has met some headwinds as it tries to move closer towards its 2% inflation target.”

Core US inflation slowed in the year to January too.

The all items less food and energy index rose 5.6% over the last 12 months, its smallest 12-month increase since December 2021, the inflation report says.

In January alone, core inflation rose by 0.4%, lifted by shelter (ie housing costs), motor vehicle insurance, recreation, apparel, and household furnishings.

The Federal Reserve will be watching core inflation measures closely, for signs as to whether inflationary pressures are ebbing.

Here’s Heather Long of the Washington Post on the increase in monthly US inflation last month:

US inflation slowed to 6.4%

Newsflash: US inflation was higher than expected in January.

The US consumer prices index rose by 6.4% in the year to January, the U.S. Bureau of Labor Statistics reports, only slightly lower than December’s 6.5%.

That’s higher than expected (the consensus was for a drop to 6.2%), but it is the smallest 12-month increase since October 2021.

In January alone, prices rose by 0.5%, an acceleration after rising 0.1% during December.

The index for shelter was by far the largest contributor to the monthly increase in inflation, accounting for nearly half of the pick-up, the BLS says. The indexes for food, gasoline, and natural gas also contributed.

The report explains:

The food index increased 0.5 percent over the month with the food at home index rising 0.4 percent. The energy index increased 2.0 percent over the month as all major energy component indexes rose over the month.

The drop in the annual rate does suggest that price pressures are easing, but not by as much as economists had thought.

Updated

There’s less than five minutes until the US inflation report is released….

The consensus forecast is that annual CPI inflation slowed to 6.2%, from 6.5% in December.

In the energy market, OPEC has raised its 2023 forecast for global oil demand growth in its first upward revision for months.

The Paris-based thinktank cited China’s relaxation of COVID-19 restrictions and slightly stronger prospects for the world economy.

Global oil demand will rise this year by 2.32 million barrels per day (bpd), or 2.3%, the Organization of the Petroleum Exporting Countries (OPEC) said on Tuesday in a monthly report. The projection was 100,000 bpd higher than last month’s forecast.

“Key to oil demand growth in 2023 will be the return of China from its mandated mobility restrictions and the effect this will have on the country, the region and the world,” OPEC said in the report.

“Concern hovers around the depth and pace of the country’s economic recovery and the consequent impact on oil demand.”

The markets could be volatile once the US inflation report hits the wires:

Wall Street stock index futures have crept a little higher, ahead of January’s US consumer inflation data at 1.30pm UK time (8.30am EST).

That report could offer investors further clues to when the Federal Reserve might relax monetary policy.

The Dow Jones industrial average is 0.1% higher in pre-market trading, while the broader S&P 500 is on track to open 0.25% higher.

Updated

The global oil and gas industry’s profits in 2022 jumped to some $4 trillion from an average of $1.5 trillion in recent years, the head of the International Energy Agency (IEA), Fatih Birol, said today.

Reuters has the details:

Despite those profits, countries depending on oil and gas revenue should prepare to reduce their reliance on petroleum as demand is going to fall in the longer term, Birol told a conference in Oslo while speaking via video link.

“Especially the countries in the Middle East have to diversify the their economies. In my view, the COP28 (climate summit) could be an excellent milestone to change the destiny of the Middle East countries,” Birol said.

“You cannot anymore run a country whose economy is 90% reliant on oil and gas revenues because oil demand will go down,” he added.

This year’s United Nations climate talks will be hosted by the United Arab Emirates, a members of the OPEC group of oil producing countries.

The jump in energy prices due to Russia’s invasion of Ukraine allowed several oil giants to report record profits for last year, including BP, Shell, Exxon and Chevron.

Updated

After a morning of gains, the FTSE 100 index is trading around 7981 points as the clocks chime noon in the City, up 0.45% or 34 points.

That leaves the index firmly on track for a new alltime closing high today, after it hit a new intraday high of 7996 points this morning.

Investors will be watching the latest US inflation report, in 90 minutes, to see if price pressures have eased. If so, shares could be lifted higher still, perhaps to the heights of 8,000 points for the first time….

Rob Morgan, chief investment analyst at Charles Stanley points out that the FTSE 100 has underperformed other indices over the last 20 years, but it has a good track record of returning dividends to shareholders.

“Over the past two decades, the UK’s FTSE 100 index has been a poor performer compared with most other markets. The index, representing the 100 largest stock market-listed UK companies, is a mere 25% higher than at the turn of the millennium.

“Admittedly, this represents an unflattering starting point. The index was puffed up by unsustainable valuations of ‘TMT’ stocks during the dotcom bubble in the late 1990s. Yet it has been a clear laggard against the US or emerging markets where investors have comfortably trebled their money – in capital growth terms alone.

“Where the FTSE has stood out, and consequently generated respectable returns, is dividends – the profits declared by companies and paid to shareholders. Reinvesting these for growth has boosted returns substantially, and the old fashioned values of seeking out sustainable and growing pay outs from shares could finally nudge it over the line to its next milestone: 8,000 points.”

Britain welcomes Air India deal with Airbus and Rolls-Royce

The logo of aircraft manufacturer Airbus at a factory, in Montoir-de-Bretagne, western France.

The UK government has welcomed the news today that Air India has agreed to buy 250 jets from Airbus, including 210 narrowbody planes and 40 widebody aircraft

The deal is part of a huge order by Air India for 470 planes, which is expected to also include an order for 220 planes from Airbus rival Boeing, Reuters reports, as the airline heralds a decade-long expansion and reinvents itself under the new ownership of Tata.

N Chandrasekaran, chairman of Tata Group, said today:

“We on our part are going through a massive transformation because we are committed to building a world class airline. One of the most important thing is a modern fleet which is efficient and can perform for all routes.”

Prime minister Rishi Sunak says the deal will create jobs and boost exports from Britain, where the French planemaker designs and makes aircraft wings.

The deal should create 450 manufacturing jobs and bring more than £100m of investment to Wales, where Airbus manufactures wings, the British department for business and trade said.

The deal also includes 40 wide-body A350 aircraft powered by Rolls-Royce engines, which are assembled and tested in Derby in central England.

Holiday group TUI has given travel stocks a lift today, by telling shareholders it is seeing encouraging booking trends for summer and next winter.

TUI reported that it carried 3.3m customers in the final quarter of 2022 – an increase of one million versus the prior year, and 93% of the number just before the pandemic in October-December 2019.

Booking volumes overall in the last four weeks are now above pre-pandemic at higher prices, TUI said:

The start into the new year has seen significant booking momentum with record booking days online in both the UK and Germany.

Shares in TUI are up 1.7% this morning, on the FTSE 250 index of medium-sized companies. EasyJet have gained 4.4% and Wizz Air are up 2.1%.

Concerns among investors of a global recession have ‘melted away’, according to a survey of European fund managers.

Bank of America reports that a net 24% of those fund managers polled think the global economy will go into a recession over the next twelve months. That’s down from 51% last month and a peak of 77% in November.

This easing of recession worries has helped to push up stock markets this year.

BofA says:

Whereas 61% of investors still think European growth will slow in response to tightening credit conditions (down from 70% last month), a growing share of 33% expects growth to be resilient thanks to savings and order backlogs (up from 16%). 33% see resilient US growth in the near term before a slowdown due to monetary tightening (up from 25%).

Updated

FCA cracks down on illegal crypto ATMs

Britain’s financial watchdog has raided several sites in Leeds in a crackdown on illegally operated cryptocurrency ATMs.

The Financial Conduct Authority says it entered several sites around the City, in a joint operation with West Yorkshire Police’s Digital Intelligence and Investigation Unit.

This is thought to be the first action of its type in the UK.

Crypto ATMs allow customers to buy or convert funds into cryptoassets. But there are no crypto ATM operators with FCA registration, which they need to do to comply with UK Money Laundering Regulations.

Mark Steward, executive director of enforcement and market oversight at the FCA, said:

Unregistered Crypto ATMs operating in the UK are doing so illegally.

We will continue to identify and disrupt unregistered crypto businesses operating in the UK.

Crypto businesses operating in the UK need to be registered with the FCA for anti-money laundering purposes. However, crypto products themselves are currently unregulated and high-risk, and you should be prepared to lose all your money if you invest in them.

Sushil Kuner, at the law firm Gowling WLG, says the regulator taking a more interventionist approach:

This is a prime example of the FCA being more interventionist in what is one of its highest priority risk areas.

Crypto ATM operators are generally considered to be cryptoasset exchanges under the UK Money Laundering Regulations and anyone operating as such without first being registered with the FCA for AML [anti moneylaundering] purposes risks being found guilty of a criminal offence.

Updated

Insolvencies jump 7% year-on-year

There were 1,671 company insolvencies across England and Wales last month, new figures from the Insolvency Service show.

That’s a 7% increase year-on-year, and 11% more than in January 2020 – just before the pandemic hit.

But it’s a decline on December, when 1,964 firms collapsed.

A chart showing insolvencies in England and Wales
A chart showing insolvencies in England and Wales Photograph: The Insolvency Service

There were 189 compulsory liquidations in January 2023, which is 52% more than in January 2022.

Compulsory liquidations have increased from historical lows seen during the coronavirus (COVID-19) pandemic, partly as a result of an increase in winding-up petitions presented by HMRC, the Insolvency Service says.

There were also 1,382 Creditors’ Voluntary Liquidations, in which a company which can’t pay its debts decides to put itself into liquidation.

Business insolvencies rose through 2022 as costs soared, the economy stumbled, and pandemic-related government support ended.

Ed Macnamara, head of restructuring at PwC’s Restructuring and Forensics practice, warns of a ‘domino effect’ as companies struggle to pay their bills:

While the number of company insolvencies in January is down on the month before, any respite is likely to be short-lived. The data, which shows a 7% rise on the year before, serves as a reminder that we are still in the midst of a difficult trading environment with rising interest rates and high inflation which, when combined, generally results in more company failures.

We’re also seeing an uptick in both late payments and the number of requests to extend credit terms. In the construction sector for example, clients have flagged a significant increase in new customer accounts being opened as companies try to spread their credit risk across the market. In addition, many subcontractors are reporting that they’re unable to pay for products because they haven’t been paid either. This domino effect is likely to increase the squeeze on businesses already struggling with their debts and might mean that some are forced into insolvency.

Updated

The GMB union has spotted that the number of UK workers on zero hours contracts has hit a record high.

Today’s labour market report shows there were 1,133,441 people employed on a zero hours contract in October to December 2022. That’s up from 1.034m in the final quarter of 2021, and the highest on record.

The GMB says Rishi Sunak is presiding over a ‘tidal wave’ of insecure work.

Younger people (those 16-24), and those in the hospitality industry, are more likely than other workers to be on zero-hours contracts.

Gary Smith, GMB general secretary, said:

This government is making history for all the wrong reasons.

Rishi Sunak is presiding over a tidal wave of insecure work and exploitative zero-hours employment is higher than ever.

The economy is stalling and his answer is to launch a bonfire of workers’ rights while other countries get with ending these contracts for good.

Zero-hours contracts are a key part of a broken employment model in sectors from social care to retail. It’s time for a government that will fight for workers’ rights.

Updated

The pound has rallied this morning, after this morning’s labour market statistics showed a rise in wages in the last quarter.

Sterling has gained half a cent against the US dollar to $1.219.

The 6.7% rise in regular pay (excluding bonuses) over the last year could potentially spur the Bank of England to raise interest rate again, perhaps from 4% to 4.25% at its next meeting, in March.

“It might be stretching things to say love is in the air when it comes to the stock market, but the FTSE 100 is mounting a Valentine’s Day push toward the 8,000 level,” says AJ Bell investment director Russ Mould.

All eyes will be fixed on Washington later as the US Bureau of Labor Statistics posts inflation numbers for January.

The expectation is for another modest easing of inflationary pressures and anything more than this could provide a real boost to sentiment – though conversely a renewed move higher in the inflation rate could prompt heavy selling.

In the UK record wage growth raised concerns the UK’s own inflation problems might prove stickier than feared ahead of the UK posting its own CPI numbers on Wednesday.

However, the Bank of England will likely be hoping the lagged impact of a series of rate increases is yet to fully come through amid growing expectations a rate hike in March will be the last.

Updated

FTSE 100's strength doesn't reflect UK economy's performance

The tailwinds from another decent market performance in the US overnight have given the FTSE 100 another boost this morning, Richard Hunter, head of markets at Interactive Investor, tells us.

He also points out that the FTSE 100 is not a gauge of the UK economy …

The index continues to attract investment interest with its exposure to banks and energy companies still seeing the benefits of rising interest rates and a recovering Chinese economy respectively. At the same time, its proliferation of defensive, and in some cases somewhat inflation-proof stocks, along with an average dividend yield of 3.5% all add to its attractions as a potential investment destination of choice.

Perhaps most importantly, the index is not an accurate barometer of the UK economy. An estimated 75% of company earnings come from overseas which, coupled with the more recent weakness in sterling, means that these earnings become more valuable on repatriation.

These combined factors resulted in a strong outperformance compared to many other global indices last year. In 2022, for example, the main indices in the US plummeted - the Dow Jones was down by 8.8%, the S&P500 by 19.5% and the technology-heavy Nasdaq by 33.1%. The FTSE 100 eked out a gain of 0.9% (excluding dividends) and is now ahead by over 7% in the year to date.

Last week we learned that the UK economy stagnated at the end of 2022, with no growth in the October-December quarter.

The market is not the economy, rather it is a discounting mechanism which aims to anticipate future events, both economic and corporate, Hunter explains:

If inflation and interest rates are peaking, and if company earnings continue to show resilience in the face of the economic challenges to come, the relatively cheap valuation of the index compared to many of its global peers could leave this rally with further to run.

The strength of the FTSE 100 is therefore positive news for investors as well as its constituents, which happened to be based in the UK, as opposed to the performance of the UK economy itself.”

Updated

The FTSE 100 is closing in on the 8,000-point mark for the first time.

The index has just climbed to 7,996, an all-time high.

It’s all about today’s inflation data from the US [at 1.30pm UK time], says Neil Wilson of Markets.com.

Core inflation is expected to decline to 5.4% from 5.7%, up +0.4% month on month, with the headline print down to +6.2%. For all the talk of disinflation, price growth remains way too high.

The market is going to realise that a peak inflation is leading to more of a plateau not a sharp march down.

The FTSE 100 pushed up to a fresh record high, nudging closer to the magic 8,000 level, as risk remained bid following a positive start to the week ahead of today’s all-important US inflation data.

European equity markets were broadly higher after Wall Street closed up more than 1% and stocks in Asia were mainly higher.

Updated

Ford announces job cuts

Car giant Ford has said it is cutting around 3,800 jobs across Europe, including 1,300 in the UK, over the next three years.

That’s a fifth of its total workforce in the UK, the BBC reports.

The reduction in product development and administration jobs is as part of an overhaul as Ford battles rising costs and pivots its production towards electric vehicles.

Around 2,300 jobs will be cut in Germany, and 200 in the rest of Europe, the company said, adding it intends to achieve the reductions through voluntary separation programmes.

The American carmaker will retain around 3,400 engineers in Europe who will build on core technology provided by their U.S. counterparts and adapt it to European customers, European passenger electric vehicle (EV) chief and head of Ford Germany Martin Sander said on a press call.

Sander added:

There is significantly less work to be done on drivetrains moving out of combustion engines. We are moving into a world with less global platforms where less engineering work is necessary.

This is why we have to make the adjustments.

Updated

FTSE 100 hits record high, with 8,000 points in view

In the City, the UK’s blue-chip share index has hit a new record high, as it continues to rally in 2023.

The FTSE 100 index has jumped by 36 points, or 0.45%, to 7986 points – its highest point on record.

The FTSE has now gained 7% so far this year, as markets have been lifted by hope that inflation may have peaked, meaning central banks may slow their interest rate increases.

The index hit its first record high since 2018 at the start of this month.

Traders are hopeful that US inflation fell last month – we get January’s CPI report at 1.30pm UK time.

Mobile operator Vodafone is among the top FTSE 100 risers, up 1.8%. Yesterday, US telecoms group Liberty Global announced it had taken a 5% stake in Vodafone in a bet on the UK company’s revival – but has ruled out making a takeover bid.

The FTSE 100 has started the week on a very positive note, says Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:

There is a great deal of attention going on US and UK inflation data this week, with hopes that the Federal Reserve is going to stick to the hymn sheet when it comes to the expected 25 basis point increase in interest rates expected in March.

She warns, though, that the UK’s market mood can change “on a dime”:

Although the economy’s holding up well for now, there are still question marks hanging over corporate margins and consumer spending power, which the forward-looking FTSE may not have correctly priced in.

Updated

UK real wages should start rising in the second half of this year, predicts Simon French, chief economist at Panmure Gordon, as inflation falls.

Full story: Nearly a million days lost to strikes in December in UK

Almost a million working days were lost to strikes in December as real-terms pay growth last year dropped at among the fastest rates for more than 20 years, my colleague Richard Partington reports.

The figures from the Office for National Statistics add to the squeeze on households amid the cost of living crisis.

It said 843,000 working days were lost in December, the highest monthly figure for more than a decade, amid rolling strikes involving NHS, rail and Post Office workers, and elsewhere across the economy.

ONS figures also showed that real-terms pay, excluding bonuses, fell by 3.6% in the three months to December, among the largest falls since comparable records began in 2001.

Here’s the full story:

Political reaction

Guy Opperman MP, minister for employment, is cheered by the rise in employment in the last quarter:

It’s encouraging to see that more people are moving into work, as we know that being in employment is the best way to deliver financial security, skills and confidence.

We’ve also made huge progress for everyone looking to boost their earnings or land a new role, with the employment rate increasing and more people joining payrolls.

Growing the economy is one of our top five priorities which will deliver more high quality jobs, boosting everyone’s prospects and prosperity.

But Rachel Reeves MP, Labour’s shadow chancellor, is concerned that wages continued to lag inflation. She says:

Britain has huge potential – but 13 years of the Tories has left real wages down, families worse off, and our economy lagging behind on the global stage.

The government needs to stop sitting back and following this path of managed decline.

Labour will get people back into work, with our real plan for growth to create good, new jobs across every part of our country.

Updated

15 'terrible years' of wage growth

UK workers have now suffered 15 miserable years of real wages, says Stephen Evans, chief executive at Learning and Work Institute:

Real earnings are falling at their fastest rates since the financial crisis due to high inflation, leaving them no higher now than before the pandemic. A miserable 15 years for real wage growth means people would be earning £11,000 a year more on average if pre-financial crisis trends had continued. So as well as bringing inflation under control, we urgently need a growth plan for our economy.

Evans adds that the fall in economic inactivity at the end of 2022 is welcome… but was driven more by a reduction in young people studying than older people returning to the labour market.

He adds:

Economic inactivity is still 500,000 higher than pre-pandemic, and almost 2.5 million people are out of the labour market due to long-term sickness. Only one in ten out-of-work older people and disabled people get help to find work each year, the Chancellor must change that in next month’s spring budget.

Updated

The number of people on payrolls continued to rise at the start of this year.

Payrolled employees rose by 102,000 in January, the ONS estimates. That meant that 768,000 more people were on payrolls than in January 2022.

Since the early days of the pandemic, in February 2020, the number of payrolled employees was up by 3.5% or 1,028,000.

There was an increase in people in work, and out of work, in the UK in the last quarter of the year.

The number of people in employment rose by 74,000 in the October-December quarter, to 32.8 million. This lifted the employment rate to 75.6%

But the number of people out of work rose too, by 45,000 to 1.27 million.

Updated

ONS: Sharp rise in days lost to strikes

Here’s Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), with the key points from today’s UK jobs report:

The last quarter of 2022 saw fewer people remaining outside the labour market altogether, with some moving straight back into a job and others starting to seek work again.

This meant that although employment rose again, unemployment edged up also.

Although there is still a large gap between earnings growth in the public and private sectors, this narrowed slightly in the latest period.

Overall pay, though, continues to be outstripped by rising prices.

Though still at historically very high levels, job vacancies have dropped again, with a particularly sharp fall from the smallest employers.

The number of working days lost to strikes rose again sharply in December.

Transport and communications remained the most heavily affected area, but this month there was also a large contribution from the health sector.

Updated

UK vacancies fall

The number of vacancies across the UK has fallen, as companies hold back their hiring plans as the economy slows.

There were 1.134m vacancies in the November-January quarter, the Office for National Statistics reports. That’s a decrease of 76,000 from August to October 2022 – the seventh quarterly decline in a row.

Vacancies fell at 16 out of 18 industry sectors during the quarter, and were 135,000 lower than a year ago.

UK vacancies

Overall, the number of working days lost to strike action in the UK in 2022 was the highest since 1989, Sky News has calculated.

They say:

The number of working days lost to strike action totalled 843,000 in December, bringing the total number of strike days from June to December 2022 to 2,471,000, the highest since 1989, official figures show.

There were 4,129,000 days lost to strike action in 1989 due to industrial action by rail workers and coal miners, the Office for National Statistics said.

The loss in days due to labour disputes in December month is the highest since November 2011 due to public sector pension strikes. That month saw 997,000 working days lost to strikes.

More people returned to the labour market in the final quarter of last year, which may help the UK’s worker shortage.

Today’s labour market report shows that the UK’s economic inactivity rate dropped to 21.4%, 0.3 percentage points lower than the previous three-month period. That means that more people were either working or looking for work.

But it’s still 1.2 percentage points higher than before the pandemic.

Jack Kennedy, UK economist at jobs site Indeed, explains:

There was a record-high net flow out of economic inactivity in the latest quarter, driven by more students, retired and long-term sick moving into employment.

There remains a long way to go and overall inactivity remains high but, if sustained, these trends could help ease staffing gaps still faced by many employers despite the economic uncertainty.”

Introduction: 843,000 working days lost to strikes in December

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The wave of UK strike action at the end of last year was the most disruptive in over a decade, the latest employment data shows.

The Office for National Statistics has reported this morning that 843,000 working days were lost because of labour disputes in December 2022, the highest for any month since since November 2011.

Key services across the UK were hit by industrial action during December, as workers pushed for pay rises that kept up with UK inflation. Railway workers, Royal Mail staff, border force staff and nurses were among those taking strike action.

Today’s labour market report also shows that basic pay grew at the the fastest rate on record, outside of the Covid-19 pandemic period.

Regular pay (excluding bonuses) rose by 6.7% per year in the October-December quarter.

That may alarm the Bank of England, as it tries to bring UK inflation down from double-digit levels towards its 2% target.

The ONS says:

For regular pay, this is the strongest growth rate seen outside of the coronavirus (COVID-19) pandemic period.

Growth in average total pay (including bonuses) slowed a little, to 5.9%.

Public sector pay lagged behind private sector employees, though. Average regular pay growth for the private sector was 7.3% in October to December 2022, and 4.2% for the public sector.

But once you adjust for inflation, pay actually fell.

In real terms (adjusted for inflation), total pay shrank by 3.1% while regulay pay fell by 2.5%. This is one of the biggest falls on record.

The ONS says:

This is smaller than the record fall in real total pay we saw in February to April 2009 (4.5%), but remains among the largest falls in growth since comparable records began in 2001.

Today’s labour market also shows that the unemployment rate remained near at record low, at 3.7%.

Also coming up today

Investors are poised for the latest US inflation report, due at 1.30pm UK time.

It’s expected to show that the cost of living squeeze eased, with the consumer prices index dropping to 6.2% per year from 6.5% in the year to December.

A sharp drop in inflation would clearly be welcomed by the markets, as it could encourage US central bankers to slow their interest rate increases.

Wael Makarem, senior market strategist at trading platform Exness, says:

This could be a critical data point for the dollar and other assets in particular after the Federal Reserve slowed the pace of its interest rate increases and the surprise over the US job market’s figures.

Inflation in the US has been declining on a year-on-year basis, pushing the US central bank to review its policy. However, a surprise tomorrow could alter expectations. Higher-than-expected inflation figures could reinforce the case for higher interest rates for a longer period of time, which could push the US dollar higher. In any case, higher volatility could be expected.

The agenda

  • 7am GMT: UK labour market report

  • 10am GMT: Eurozone GDP report for Q4 2022 (second estimate)

  • 1.30pm GMT: US inflation report for January

Updated

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