Inflation inches up again but hostilities over Ukraine seem to be ticking down, helping calm financial markets
Inflation inches up again but hostilities over Ukraine seem to be ticking down, helping calm financial markets
‘’Inflation has inched up again but hostilities over Ukraine seem to be ticking down and investors are seeking solace that for now there are no big shocks to the system. The headline CPI rate has nudged up to 5.5% but it won’t move the dial of expectations much in terms of the Bank of England’s expected hike in interest rates in March. So instead the market is focusing on what appears to be the easing of immediate tensions, with Russia’s EU ambassador saying an attack is not imminent and some troops moving away from the border. But there will be a close watch on a key NATO defence ministers meeting due to take place later amid suggestions the Russian military scale down can’t be verified. After a small wobble at the open, the FTSE 100 has edged up in early trade but investors will remain highly sensitive to remarks coming from Russia and Western leaders.
The initial wave of relief over the chance that an invasion may be avoided has seen oil drop away from yesterday’s high of $96 with Brent crude falling to $92 dollars before nudging back up above $93. The Ukraine situation is still making traders edgy but it’s unlikely the defusing of the situation will end oil’s rally given that it’s also been pushed up by an overall lack of supply in an energy demanding world. That’s partly why BP has not lost ground despite the slight easing in the oil price and hopes of a de-escalation over Ukraine has helped the travel sector with British Airways owner International Consolidated Airlines ground lifting in early trade and Rolls Royce, which is highly dependent on the health of commercial air travel, among the top risers on the FTSE 100.
The latest UK inflation numbers indicate that rising fuel costs are once again among the driving forces pushing January’s prices higher. The cost of living squeeze has become even tighter with January sales seemingly few and far between for consumer goods like fashion and furniture. Just how long shoppers will keep splashing the cash will be an increasing cause for concern for retailers especially with the one two punch of another interest rate rise in March, and energy bills being hiked dramatically in April. B&Q owner Kingfisher, Primark owner Associated British Foods and whisky producer Diageo were among the fallers in early trade, amid some nervousness about the ability of consumers to swallow higher prices.’’
