US inflation rises to 3.5%, weakening hopes of early interest rate cuts – business live

The US dollar is rallying, as traders conclude that early interest rate cuts are less likely.

The dollar is up 0.4% against a basket of currencies, while the pound has dropped half a cent to $1.2614, as the markets digest today’s US inflation report.

Newsflash: Inflation across the US rose at a faster pace last month, as the cost of living squeeze continued to grip American households.

The US consumer price index rose by 3.5% per year in March, new data shows, up from 3.2% in February. That’s higher than the 3.4% which economists expected.

Energy prices rose by 2.1% ove the last year – the first 12-month increase in that index since the period ending February 2023. Food prices were 2.2% higher than a year ago.

On a monthly basis, prices rose by 0.4%, again higher than expected.

The index for shelter rose in March, as did the index for gasoline; they made up over half of the monthly increase in inflation.

The energy index rose 1.1 percent over the month. The food index rose 0.1 percent in March. The food at home index was unchanged, while the food away from home index rose 0.3 percent over the month.

This hotter-than-expected inflation report may lower the chances of cuts to US interest rates as soon as this summer.

The UK’s FTSE 100 share index continues to rally ahead of the US inflation report, to 7,999 points, up 0.8% or 65 points today.

If the US CPI report fuels hopes of early interest rate cuts, it could move higher, although a higher-than-expected inflation reading could push stocks down….

Global investors are bracing for the release of the latest US inflation figures in 15 minutes time.

The expectation is that Headline CPI for March will rise to +3.4% year-on-year, from +3.2% previously, showing that prices rose at a faster rate last month.

David Morrison, senior market analyst at Trade Nation, says:

If so, that will mean that it has tracked sideways for the past nine months, having fallen to a 25-month low of 3.0% in June last year. This is not the kind of data that will encourage the Fed to cut rates anytime soon.

In the auto sector, Volkswagen Group has reported a drop in deliveries of electric cars in Europe this year.

Volkswagen says deliveries of all-electric cars in Europe were down 24% year-on-year in the first quarter of 2024, at 74,400 vehicles.

Overall, shipments of all-electric Volkswagens fell 3% to 136,400, despite a 91% jump in sales to China.

But overall, Volkswagen Group increased its deliveries in the first quarter of 2024 by 3% to 2.10 million vehicles. The main growth drivers were China (+8%), South America (+14%) and North America (+5%).

Shares in Tesco are continuing to push higher.

They’re now up over 4% at 299p, making them the top riser on the FTSE 100 index.

Russ Mould, investment director at AJ Bell, argues that Tesco is reaping the benefits of “putting the customer first”:

For some time, it has been lowering prices on core lines in recognition that consumers are under financial pressure. That’s helped it to maintain appeal to a large number of shoppers and retain their loyalty while also helping it better compete against Aldi and Lidl. The results are clear to see – profit is going up; the business is in great shape; and it is growing market share.

A lot of companies have reported a rise in revenue in recent years that’s simply been down to raising prices. What’s more important is looking at sales volumes as any growth indicates the customer is buying more products rather than simply shelling out more for the same items. Volume growth indicates a healthy business. On this basis, Tesco is fit as a whistle.

“It’s helped that Tesco has benefitted from people trading down from higher end retailers. Accepting that a high interest rate environment means more careful monitoring of how money is spent, even wealthier individuals have taken steps to shift their spending habits. Whereas once they might have been happy to spend big at Waitrose or Ocado, some of these consumers have shifted to Tesco and found that its Finest range still offers the higher quality products they desire, but at a cheaper price point.

“A good company will always take the spoils of a fruitful period and reinvest the winnings back into the business. That’s precisely what Tesco is doing now. It is using AI to drive productivity, putting automation technology at the heart of a new distribution centre, and making the supply chain more efficient among other activities.

Over in Germany, the number of companies failing has hit a new high.

The Leibniz Institute for Economic Research Halle (IWH) has reported that insolvencies by German partnerships and corporations rose to another record high in March.

According to the IWH, there were 1,297 insolvencies of partnerships and corporations in Germany in March.

That’s 9% more than the previous record, set in February, and 35% more than in March 2023

IWH points out that insolvencies often lead to high and permanent losses of income and wages for the affected employees.

More happily, IWH believes an end to the increase in the number of insolvencies is in sight, citing recent signs of economic improvement.

Looking back at China… Beijing has criticised the European Union for launching a subsidy investigation into Chinese wind turbine companies.

China’s foreign ministry spokesperson Mao Ning told reporters today:

“The outside world is worried about the rising tendency of protectionism in the EU,”

“China is highly concerned about the discriminatory measures taken by the European Union against Chinese companies and even industries.”

Yesterday, EU competition chief Margrethe Vestager announced an inquiry into whether Chinese companies who are involved in wind parks across Europe may have benefited from state support from Beijing.

The investigation will use the EC’s new powers designed to clamp down on subsidies from foreign governments that distort markets.

UK government debt remains in demand.

An auction of British government bonds today attracted the strongest demand from investors for gilts since April 2020, Reuters reports.

The Debt Management Office sold £4bn of the 3.75% 2027 gilt and attracted orders worth £14.7bn - a ratio of 3.68.

That’s the highest ratio of orders to bonds on offer, known as the bid to cover ratio, since April 2020.

Even though inflation pressures are easing, millions of households are still struggling.

More than 7.4 million people in the UK struggled to pay a bill or a credit repayment in January, according to financial regulator the FCA this morning.

That’s significantly higher than before the cost of living crisis began, although lower than last year when prices were rising at a faster rate.

The FCA is reminding consumers in financial difficulty that lenders are obliged to listen to customers’ concerns, and that discussing options with a lender won’t hurt your credit score.

Steve Vaid, chief executive of the Money Advice Trust, the charity that runs National Debtline, says:

“Millions of people are still struggling with this cost of living crisis, and we all need to do more to make sure they get the help and support they need.

“The FCA’s decision to make permanent its pandemic-era protections for people in debt is a welcome step – and the regulator has set clear expectations for firms on the crucial role that debt advice plays.