FTSE 100 and DAX 30 Slip on Commodity Losses, Set for Rebound as UK Inflation Eases

Nearing Tuesday’s closing bell, London’s FTSE 100 is down approximately 35 points, weighed down by an almost 5% drop in oil prices and losses in copper and other metals prices following disappointment about China’s projected economic boost.

China may raise an additional $850 billion in new debt to stimulate a sagging economy, according to reports https://t.co/RkUlojZfFS pic.twitter.com/b1JppFrS5T

— Reuters (@Reuters) October 15, 2024

The blue-chip FTSE 100 (.FTSE) closed 0.5% lower, whereas the mid-cap FTSE 250 (.FTMC) fell 0.1%. As the morning bells ring, the blue chip index is traded in green with 0.77% increase , FTSE 250 followed the suit and is traded with gains of 0.53%.

The FTSE 350 energy index (.FTNMX601010) fell 3.5%, making it the sector’s biggest loser, as crude prices fell nearly 5% due to a worse demand expectation and after a media report said Israel would not strike Iranian oil targets, relieving fears of supply disruption.

Amongst single stocks, Bellway (BWY.L) rose 8.3% after the homebuilder said it plans to build more homes in the fiscal year 2025, boosted by the potential of additional borrowing cost cuts.

The FTSE 30 homebuilders index (.FTNMX402020) increased by 3.1%, leading to sectoral gains.

The FTSE 100 is expected to recover.

The FTSE 100 is expected to rebound on Wednesday, following news that UK inflation has fallen to its lowest level in three years.

UK inflation in surprise fall to 1.7% in year to September – as prices rise at slowest rate in more than three years https://t.co/XlrnzeAVac

— BBC News (UK) (@BBCNews) October 16, 2024

The London benchmark fell 43 points yesterday to settle at slightly over 8,249. Futures are showing a 15-point increase this morning.

London’s top flight is expected to begin broadly flat this morning, with the oil benchmark marginally higher at $74.44 per barrel.

The FTSE 100 stocks are expected to surge today as the UK Office for National Statistics released its September inflation update this morning. It revealed that the consumer price index was up 1.7% year on year, well below the previous month’s 2.2% increase.

Last month, UK inflation fell to its lowest annual rate in three years, with the consumer prices index rising 1.7% in September from 2.2% in August, lower than the market’s expectation of 1.9%.

On a monthly basis, the CPI was unchanged, down from the previous 0.3% gain and below estimates of a 0.1% increase.

Core CPI, which excludes more volatile items like as food and gasoline, was up 3.2% year on year, down from the previous 3.6% and still below the 3.4% consensus prediction.

The CPI for services, a key metric used by the Bank of England to track the persistence of inflation, came in at 4.9%, down from 5.6% the previous month and below the projected 5.2%.

DAX Slips After Hitting Record High Amid Inflation Concerns

On Tuesday, October 15, the DAX slipped by 0.11, partially reversing a 0.69% gain from the previous session, closing at 19,486. Significantly, the DAX climbed to an all-time high of 19,634 earlier in the day. As the session starts on Wednesday, DAX 30 is traded in red with a decline of 0.077%.

Investor bets on ECB rate cuts in October and December drove the DAX to a new high. In contrast, on Tuesday, US consumer inflation expectations data undoubtedly contributed to the DAX’s losses. Inflation expectations unexpectedly stayed at 3.0%, indicating that consumers may increase spending because inflation will not soften. Indications of increased expenditure and inflation may dampen bets on several Q4 2024 Fed rate cuts.

US Core CPI has been above 3% for 41 straight month, the longest period of elevated inflation in the US since the early 1990s.

Video: https://t.co/zEJt400cSl pic.twitter.com/5oTSX1gZCt

— Charlie Bilello (@charliebilello) October 14, 2024

Fed’s Rate Path in Focus

Investors will be paying close attention to FOMC member speeches on Wednesday. Insights about the economic outlook, labor market, inflation, and Fed rate path might all impact the DAX.

Headline inflation in September:

🇬🇧 1.7%
🇩🇪 1.6%
🇸🇪 1.6%
🇪🇸 1.5%
🇫🇷 1.1%
🇮🇹 0.7%

The high inflation episode in Europe is over & central bank pivots are in the making. @riksbanken board members already openly talking about risk of persistent inflation undershoot (hello 2010s). pic.twitter.com/t3sDzbow9o

— Daniel Kral (@DanielKral1) October 16, 2024

Fed support for rate decreases in November and December, along with prospects of a soft US landing, could propel the DAX toward 19,750. Conversely, demands to postpone rate hikes because persistent inflation might push the DAX below 19,500.

Beyond the economic calendar, investors should analyze earnings outcomes.