European stocks fell and US futures ticked higher on Thursday, as investors assessed contradictory economic data emerging from the world’s biggest economy and looked ahead to a crucial fiscal statement in the UK.
The regional Stoxx Europe 600 fell 0.1 per cent and Germany’s Dax gained 0.2 per cent. Contracts tracking Wall Street’s S&P 500 meanwhile added 0.1 per cent, while those tracking the tech-heavy Nasdaq 100 rose 0.2 per cent.
London’s FTSE fell 0.5 per cent hours before UK chancellor Jeremy Hunt is expected to announce a sweeping package of spending cuts and tax rises designed to tame inflation, patch up the country’s battered finances and repair some of the reputational damage wrought by his predecessor Kwasi Kwarteng’s disastrous “mini” Budget in late September.
Data out on Wednesday showed UK inflation surged to a 41-year high in October, accelerating to 11.1 per cent from 10.1 per cent in September on the back of rising energy and food prices.
The reading adds to pressure on the Bank of England to raise interest rates from the current level of 3 per cent when it next meets in December, even as data suggest the UK has already entered a recession.
Silvana Tenreyro, an external member of the BoE’s Monetary Policy Committee, last week warned that UK rates were already higher than they needed to be to eventually bring inflation back to about 2 per cent.
“A credible Budget will deliver substantial fiscal tightening and cement views of a multi-quarter UK recession and one in which the Bank of England will continue to hike rates into 2023,” said Chris Turner, head of research for UK at ING.
Sterling gave up its early gains to trade 0.2 per cent lower against the dollar to $1.18.
The moves come after US retail sales climbed more than expected in October, rising 1.3 per cent, more than the 1 per cent rise forecast by economists. Another batch of data out on Wednesday showed US manufacturing output rose 0.1 per cent in October, slightly less than the 0.2 per cent increase predicted.
In government bond markets, the yield on the two-year Treasury note was unchanged at 4.36 per cent, while the yield on the benchmark 10-year note rose 0.03 percentage points to 3.72 per cent. Yields rise as prices fall.
Asian equities fell on Thursday, adding to losses in the previous session.
Hong Kong’s Hang Seng index was down 1.1 per cent, China’s CSI 300 slipped 0.4 per cent and South Korea’s Kospi fell 1.4 per cent. Japan’s Topix gained 0.1 per cent.