In a blow to Donald Trump’s demand for the US Federal Reserve to start lowering interest rates, US inflation unexpectedly increased to 3% in January according to data released this week by the Bureau of Labor Statistics, making it more likely the Fed will proceed slowly and cautiously with any future rate cuts. A poll by Reuters had seen economist expectations of inflation holding steady at December’s figure of 2.9%.
Investors are now betting on just one rate cut this year, against previous expectations that a first cut would come in September followed by another before the end of the year. The S&P500 initially dropped 1.1% before closing out the day 0.3% lower. The tech-heavy Nasdaq closed slightly higher.
US inflation unexpectedly increased to 3% in January according to data released this week by the Bureau of Labor Statistics.
Bank of England economic growth
In contrast to last week’s bleak outlook for economic growth by the Bank of England, data released on Thursday by the Office for National Statistics showed the UK economy unexpectedly grew 0.1% in the last quarter of 2024. Economists polled by Reuters had expected a 0.1% contraction, but a strong December figure of 0.4% month-on-month growth brought the quarter back into positive territory, thanks to the UK’s strong services sector. Sterling was up 0.7% intraday against the dollar at $1.252, having also been boosted by the inflation data from across the pond.
Sterling was up 0.7% intraday against the dollar at $1.252, having also been boosted by the inflation data from across the pond.
Corporate news
In corporate news, activist investor Elliott Management has built up a stake of just under 5% of BP, becoming their third largest shareholder. The position is currently valued at around £3.8bn, and is one of the hedge fund’s largest. According to sources close to the situation, Elliott aims to force the troubled oil major to reduce spending on renewable energy and make big divestments. BP had a tough 2024, as the share price fell 30% between April and December due to poor financial performance and a lack of strategic direction from chief executive Murray Auchincloss. However, the shares have bounced 14% year to date as markets speculate the low valuation makes BP a prime target for an activist investor or even a takeover bid.
Our specialist's final thought
"BP had a tough 2024, as the share price fell 30% between April and December due to poor financial performance and a lack of strategic direction from chief executive Murray Auchincloss."
