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

Neil Wilson, chief market analyst at Finalto, said:

‘In short: You ain’t getting a March rate cut. It is the kind of print that shouts the Fed does not need to rush to cut this quarter. Disinflation won’t be linear and we think the Fed is going to be rather (perhaps overly) cautious in easing in this kind of environment. It’s going to take way, way longer to get to target – if indeed at all – and the market is the wrong side of this reality.

Markets have moved post CPI to reduce bets on a March cut and the amount of easing in total this year….we’d always said the post Dec FOMC reaction was way over done and this is reverting to the mean now….though we still are a little unsure where the reaction function of the Fed is right now – could it be unusually proactive this time? That is an unknown but it seems unlikely that is what the market has priced. Stock futures sold off a bit with the Dow swinging around in a roughly 200-pt range. USD trades firmer with front-end yields.’

Seema Shah, chief global strategist at Principal Asset Management:

‘Today’s inflation report reinforces the notion that the market had gotten a little overexcited around the timing of rate cuts.

‘These are not bad numbers, but they do show that disinflation progress is still slow and unlikely to be a straight line down to 2%.

‘Certainly, as long as shelter inflation remains stubbornly elevated, the Fed will keep pushing back at the idea of imminent rate cuts. Yet, while the market was probably overenthusiastic in its initial expectations, the stars should finally align for Fed cuts – most likely around mid-year.’

Fresh data shows headline CPI rose 3.4 per cent year-on-year in the US in December, higher than forecasts of 3.2 per cent increase. On a monthly basis, CPI advanced 0.3 per cent versus expectations of a 0.2 per cent gain.

Core CPI, excluding volatile items like food and energy, rose 3.9 per cent year-on-year, compared with forecasts of a 3.8 per cent increase.

Ten-year Treasury yields are at 4.026 per cent, little changed on the day, while two-year yields jaeb edged up to 4.379% per cent.

Taylor Wimpey has warned the UK housing market outlook remains uncertain in the near term amid an ‘extremely challenging’ planning approval environment.

The group, which struck a cautionary tone ahead of the key spring selling season, saw its selling prices increase in the last year and told investors on Thursday that lower mortgage rates had helped boost enquiry levels at the start of 2024.

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

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

Trump Turnberry in Ayrshire, which boasts three courses and a hotel, has been loss-making since the former US president bought it for close to £50million 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 a bit of festive cheer of their own. They have both delivered good results and are taking market share. With Sainsbury’s claiming the same, the private equity backed supermarkets, Asda and Morrisons, must still be suffering and not enjoying quite the same positivity.

‘Interestingly in the results we are seeing a good picture of the British consumer. M&S is seeing its value range of food items do very well, up 18%, while Tesco saw its Finest range climb 17%. Both ranges probably compete with one another on price and thus you are seeing a consumer who is willing to spend a little bit extra still, especially on special occasions.

‘We are also seeing a return to growth for online shopping following the post-Covid normalisation. Both Tesco and M&S saw double digit growth here in food and clothing, 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 2023s. Tesco has delivered an explicit upgrade to guidance, while M&S has implied a small one, but has subsequently been treated more harshly by the market. These results effectively complete its turnaround story, and given how much the share price has gone up in the last year, perhaps investors are using these results as a time to take some profits.’

The US securities regulator has finally given the green light for the launch of exchange-traded funds tracking the price of Bitcoin, marking a watershed moment for crypto assets.

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

It’s been a rocky 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 track for better-than-expected profits this year after enjoying record sales over the Christmas period.

Tesco expects a retail-adjusted operating profit of £2.75billion for the year, up from a previous range of between £2.6billion and £2.7billion.

Bosses at the supermarket giant said its growth was boosted by investment to keep prices low, as it joins rivals in efforts to stop shoppers switching to fast-growing German discount rivals Aldi and Lidl.

Marks & Spencer Group sales beat lofty expectations over the key Christmas trading period as groceries and womenswear drove a surge in demand.

The retailer’s like-for-like sales soared 8.1 per cent in the 13 weeks to 30 December, as food sales growth smashed forecasts at 9.9 per cent, and clothing and home revenues jumped 4.8 per cent – well ahead of expectations of 2.8 per cent.

Boss Stuart Machin said M&S had led the food market with volume growth of around 7 per cent in each month of the quarter, serving ‘more customers than ever before’, while womenswear was the ‘standout, growing volume and value significantly ahead of the market’.