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European stocks push higher as UK inflation falls less than expected

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The FTSE was higher as the consumer prices index dropped to 3.2% in March, the lowest since September 2021, down from 3.4% in February.

The FTSE was higher as the consumer prices index dropped to 3.2% in March, the lowest since September 2021, down from 3.4% in February. Above, shoppers at a local supermarket. (Justin Lambert via Getty Images)

The FTSE 100 (^FTSE) and European stocks pushed marginally higher on Wednesday as UK inflation fell to its lowest level in two and a half years, as price pressures continue to ease.

The Office for National Statistics (ONS) revealed that the consumer prices index dropped to 3.2% in March, the lowest since September 2021, down from 3.4% in February.

However, this came in higher than the 3.1% economists expected.

  • London’s benchmark index was just 0.1% higher in early trade

  • Germany’s DAX (^GDAXI) climbed 0.2% and the CAC (^FCHI) in Paris headed 0.6% into the green

  • The pan-European STOXX 600 (^STOXX) was up 0.1%

  • Wall Street is set to open higher as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the green

  • Rising fuel prices limited fall in UK inflation

  • Gatwick owner buys Edinburgh Airport for £1.3bn

Read more: UK inflation drops to 3.2% in March as Bank of England hints at rate cuts

“UK inflation remained a little higher than hoped in March, reflecting the strength of the economy, particularly the consumer sector, which is in pretty good shape,” Neil Birrell, chief investment officer at Premier Miton Investors, said.

“Inevitably everyone will be wondering what this means for interest rate cuts. The answer is probably not much, as this is just a case of inflation not slowing as quickly as hoped.

“However, the data does mean it’s unlikely the Bank of England will move to the top of the starting grid when it comes to who cuts first; them, the Fed or the ECB.”

Follow along for live updates throughout the day:

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  • Labour shadow chancellor hits out

    Rachel Reeves, Labour’s shadow chancellor, said:

    Conservative ministers will be hitting the airwaves today to tell the British people that they have never had it so good. However, after 14 years of economic failure under the Conservatives working people are worse off.

    Prices are still high in the shops, monthly mortgage bills are going up and inflation is still higher than the Bank of England’s target. At the same time Rishi Sunak risks crashing the economy again with his Liz Truss-backed £46bn unfunded tax plan to abolish national insurance.

    The truth is Rishi Sunak is too weak to fix the economy his party broke and too out of touch to deliver for working people. It’s time for change. Only Labour has a long-term plan to grow our economy, cut people’s bills and make working people better off.

  • The plan is working, says Hunt

    London, UK. 6th Mar, 2024. Chancellor of the Exchequer Jeremy Hunt poses in Downing Street. Notable measures in today's Budget were a 2p cut in National Insurance contributions and the abolition of the non-dom tax status for foreign nationals. (Credit Image: © Tejas Sandhu/SOPA Images via ZUMA Press Wire) EDITORIAL USAGE ONLY! Not for Commercial USAGE!

    On the back of the latest inflation news, chancellor Jeremy Hunt said:

    The plan is working: inflation is falling faster than expected, down from over 11% to 3.2%, the lowest level in nearly two and a half years, helping people’s money go further.

    This welcome news comes on top of our cuts to national insurance, which save the average worker £900 a year, so people should start to feel the difference as well as see it in their pay cheques.

  • What caused the fall in inflation?

    Food prices were the main reason for the fall in UK inflation, the ONS said, with prices rising by less than a year ago.

    Meat prices fell 0.5% between February and March, compared with a rise of 1.4% a year ago, with pork products one of the big reasons behind the slowing rate.

    Similarly to last month, however, there was a partial offset from rising fuel prices.

    Core inflation, which strips out the effect of more volatile energy and food prices, also eased to 4.2% in the year to March.

  • UK inflation falls less than expected

    UK inflation fell to its lowest level in two and a half years, as price pressures continue to ease.

    The Office for National Statistics (ONS) revealed that the consumer prices index dropped to 3.2% in March, the lowest since September 2021, down from 3.4% in February.

    However, this came in higher than the 3.1% economists expected.

    Neil Birrell, chief investment officer at Premier Miton Investors, said:

    “UK inflation remained a little higher than hoped in March, reflecting the strength of the economy, particularly the consumer sector, which is in pretty good shape.

    “Inevitably everyone will be wondering what this means for interest rate cuts. The answer is probably not much, as this is just a case of inflation not slowing as quickly as hoped.

    “However, the data does mean it’s unlikely the Bank of England will move to the top of the starting grid when it comes to who cuts first; them, the Fed or the ECB.”

  • Asia and US stocks

    Shares in Asia were mixed overnight as expectations resurfaced that US interest rates may stay high for a while.

    The Nikkei (^N225) fell 1.3% on the day in Japan, while the Hang Seng (^HSI) rose almost 0.1% in Hong Kong. The Shanghai Composite (000001.SS) was 2.1% up by the end of the session.

    Across the pond, the Dow Jones (^DJI) rose 0.2% to 37,798.77, the S&P 500 (^GSPC) lost 0.2% at 5,051.38, and the Nasdaq Composite (^IXIC) lost 0.1%, closing at 15,865.25.

    The mixed reaction came after Federal Reserve chairman Jerome Powell said that the central bank has been waiting to cut its main interest rate, which is at its highest level since 2001, because it first needs more confidence that inflation is heading to its 2% target.

    Elsewhere, yields for 10-year US Treasury bonds hit a new five-month high on diminishing expectations of Fed policy easing this year, and after stronger-than-expected economic data from China revived worries that inflation could reaccelerate.

    They fell to a yield of 4.66%, down from 4.63% late on Monday.

  • Coming up…

    Good morning, and welcome back to our live markets blog. Here we cover all things happening across the global economy, and take a deep dive into what’s moving markets…

    Here’s a quick look at what’s on the agenda for today:

    • 7am: Trading updates: easyJet, Entain, Asos

    • 7am: UK CPI inflation report for March

    • 7am: UK producer price inflation report for March

    • 9.30am: UK house price and rental costs data

    • 10am: Eurozone inflation report for March (final estimate)

    • 11am: US MBA Mortgage Applications

    • 2pm: IMF to release latest Fiscal Monitor report

Watch: How does inflation affect interest rates?

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