18th Feb 2025 16:58
(Alliance News) - The FTSE 100 closed slightly lower on Tuesday, weighed by hefty falls in IHG and BT, in sluggish trade ahead of inflation figures on Wednesday.
The FTSE 100 index closed down just 1.28 points at 8,776.73. The FTSE 250 ended down 57.12 points, 0.3%, at 20,881.56, while the AIM All-Share closed down 0.70 of a point, 0.1%, at 724.52.
The Cboe UK 100 ended up marginally at 880.01, the Cboe UK 250 closed down 0.2% at 18,225.65, while the Cboe Small Companies ended down 0.7% at 16,006.83.
In European equities on Tuesday, the CAC 40 in Paris ended up 0.4%, while the DAX 40 in Frankfurt continued its record-breaking run, firming 0.2%. The Dax had earlier hit a new all-time high of 22,882.77.
US financial markets were mixed after being closed for Presidents' Day on Monday. The DJIA was down 0.2%, the S&P was up 0.1%, while the Nasdaq Composite was 0.1% lower.
In London, figures showed wage growth remains strong although there was better news on the labour market.
The Office for National Statistics said the UK jobless rate in the three months to December was 4.4%, where it stood in the three months to November. The unemployment rate had been expected to pick up to 4.5%, according to FXStreet-cited consensus.
Average yearly growth for regular earnings, so excluding bonuses, was 6.0% in December alone. Growth picked up speed from 5.6% in November. Including bonuses, pay growth picked up to 5.9% in December, from 5.5% in November.
For the three months to December, average regular pay growth was 5.9%, accelerating from 5.6% in the three months to November. Total pay growth was 6.0%, picking up speed from 5.5%. The total pay outcome beat the FXStreet-cited consensus of 5.9%, while regular pay growth was in line.
"High wage growth and modest loosening of the labour market should keep the BoE cautious and stick to the quarterly cutting path. We expect the next cut in May. We continue to expect a modest easing of the labour market, with the majority of the national insurance contributions rise being absorbed in prices," analysts at Bank of America said.
Barclays felt there were "no meaningful surprises" in today's print relative to the BoE's expectations, and "accordingly there is unlikely to be much to alter the priors of the median MPC member."
"We retain our baseline of a March hold and a resumption of rate cuts from May onwards, with cuts in May, June, August and September for a terminal rate of 3.5%."
The figures come ahead of consumer price index data on Wednesday.
Citi expects headline CPI inflation to print at 2.8%, in line with the BoE's Monetary Policy Committee's forecast.
"Services inflation may offer a modest reprieve, printing at 5.0% to 5.1%, versus MPC forecasts of 5.2%. But this is likely to reflect only transient weakness in accommodation prices. Underlying, domestically generated inflation, by contrast, is likely to remain relatively close to the MPC’s February forecast. In the months ahead we expect headline inflation to climb to a 3.5% to 4.0% range between April and September before moderating thereafter," it added.
The governor of the Bank of England said the UK is experiencing a "weak growth environment" as he cautioned over the impact of "global fragmentation" on the world economy.
Andrew Bailey, speaking at an event held by think tank Bruegel in Belgium, nonetheless said it was a good thing that inflation had eased faster than previous expectations.
Continuing disinflation in the economy – meaning price rises cooling – allowed the Bank to cut interest rates for the third time this month, Bailey said, adding: "Because we are facing a weak growth environment in the UK.
"It is quite hard to work out to what extent that weaker growth story is a result of supply-side weakness, or supply-and-demand-side weakness."
Bailey said pay growth rose "not quite as much as we were expecting" in the latest data, but that it did not change the bank's view that wage increases are likely to slow over the next year.
The pound was quoted at USD1.2616 at the London equities close Tuesday, up from USD1.2613 at the close on Monday.
The euro stood lower at USD1.0462 at the European equities close Tuesday, against USD1.0482 at the same time on Monday.
Against the yen, the dollar was trading higher at JPY151.71 compared to JPY151.41 late Monday.
On the FTSE 100, InterContinental Hotels Group fell 4.4%, after in-line results failed to inspire.
The Berkshire, England-based hotel company said pretax profit in 2024 amounted to USD897 million, a decline of 11% from USD1.01 billion in 2023.
Total revenue was USD4.92 billion, up 6.5% from USD4.62 billion. Excluding System Fund and reimbursable revenue, revenue from reportable segments rose 6.8% in 2024 to USD2.31 billion, just shy of the company-compiled consensus of USD2.32 billion.
Operating profit from reportable segments increased 10% to USD1.12 billion, in line with consensus. Pretax profit was hurt by higher interest expenses and losses on currency movements.
Peel Hunt analyst Douglas Jack felt the in-line results were not "enough to move shares further."
"IHG's share price has performed well recently and is close to our target price. However, peers Hyatt and Marriott have reported recently and saw their share prices decline subsequently. Therefore, we do not expect IHG’s share price to make significant progress today," he added.
Jefferies explained one reason for the share price fall was higher-than-expected interest expense guidance. IHG guided to adjusted interest expense of USD190 million to USD205 million for 2025 in its presentation to analysts, up from USD165 million in 2024, and above the USD169.1 million consensus.
This suggests consensus pretax profit forecasts may come down by around 2.5%, Jefferies said.
Retaining a 'hold' rating, Jefferies said the "full valuation keeps us sidelined".
BT tumbled 2.9% after Citi double-downgraded the telecommunications company to 'sell' amid questions over its broadband business, Openreach.
"We forecast Openreach turning to revenue decline in 2025/26 and staying there for the rest of the decade, which could see a negative shift in sentiment," analysts at Citi said in a research note.
The broker downgraded BT to 'sell' from 'buy' and nearly halved its share price target to 112 pence from 200p.
The strong wage growth figures put two of the UK's biggest employers, Tesco and Sainsbury, on the back foot, with the grocers falling 3.7% and 4.0% respectively.
On the FTSE 250, defence firms continued to attract buying interest on hopes of higher spending in the sector. Qinetiq rose 2.7% and Babcock International climbed 1.3%.
Elsewhere, Serica Energy shed 11% after saying Storm Eowyn had caused production from the Triton floating production storage and offloading vessel to be suspended.
As a result, the North Sea-focused oil and gas producer said 2025 production guidance is under review. It will be "restated or revised pending further clarity on the timeline and implications for the necessary Triton activities, the firm said in a statement.
Production for January averaged 37,000 barrels of oil per day, but fell to 27,000 boepd in February.
Brent oil was quoted at USD75.66 a barrel at the London equities close on Tuesday, up from USD74.98 late Monday.
Gold was quoted higher at USD2,928.05 an ounce at the London equities close on Tuesday against USD2,898.96 at the close on Monday.
Goldman Sachs raised its end-2025 gold price target to USD3,100 an ounce. It said if policy uncertainty - including tariff fears - stays high, higher speculative positioning for longer could push gold prices as high as USD3,300 by year-end.
In Wednesday's UK corporate calendar has full-year results from defence manufacturer BAE Systems, miner Glencore and Asia-focused lender HSBC.
The economic calendar for Wednesday sees a UK inflation reading at 0700 GMT.
By Jeremy Cutler, Alliance News reporter
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