A weaker pound cushioned the internationally-exposed FTSE 100 early Wednesday as an elevated UK inflation reading stoked 'stagflation' fears.
The blue-chip index edged up despite inflationary concerns dogging constituent Tesco, which tumbled in early trade as it guided to a dip in profit in the year ahead.
The FTSE 100 index was up 8.88 points, or 0.1%, at 7,585.75 early Wednesday. The mid-cap FTSE 250 index was down 95.43 points, or 0.5%, at 20,913.49, while the AIM All-Share index was down 2.57 points, 0.2%, at 1,053.09.
The Cboe UK 100 index was up 0.1% at 755.41. The Cboe 250 was down 0.4% at 18,401.23, and the Cboe Small Companies up 0.1% at 15,424.56.
The pound was quoted at $1.2989 early Wednesday, down from $1.3037 at the London equities close on Tuesday. Sterling was trading around $1.2998 just prior to the inflation print.
The UK consumer prices index rose by 7.0% in the 12 months to March 2022, advancing from February's 6.2% rise, data from the Office for National Statistics showed.
Wednesday's print is the highest 12-month inflation rate in the National Statistics series, which began in January 1997. It is also the highest rate in the historic modelled series since March 1992.
The market consensus - according to FXStreet - had tipped a 6.7% rise.
Danni Hewson, AJ Bell financial analyst, said: ‘There's no way to sugar coat what's happening to prices. Pretty much everything is significantly more expensive than it was a year ago and there is every indication the situation is just going to get worse.
‘Energy prices sky-rocketed too and though October's price cap kept the worst of it in check for households' - manufacturers, retailers, pretty much all businesses weren't cushioned in the same way and those prices are being passed on to the consumer leaving them with difficult choices to make. And even with the price cap the cost of keeping the lights on and the home fires burning have increased, but then what hasn't.’
The inflation data followed Monday's figures showing UK economic growth lagged behind expectations in February. GDP grew by 0.1% month-on-month in February, slowing from 0.8% growth in January, and coming in behind market consensus - according to FXStreet - for 0.3% growth.
In London, Tesco was the worst performer in the FTSE 100 in early trading, losing 4.8%.
The blue chip grocer saw annual profit rise following a ‘strong performance’ during the period, but has guided for slowing growth next year.
In the year to February 26, pretax profit ballooned to £2.03 billion from £636 million the year prior. Revenue rose 6% to £61.34 billion from £57.89 billion, as group sales increased 2.5% to £54.77 billion from £53.45 billion.
Tesco declared an annual dividend of 10.90 pence, rising from the 9.15p distributed the year before. Alongside this, the firm will buyback £750 million worth of shares over the next twelve months.
However, for financial 2023, Tesco is guiding for retail adjusted operating profit between £2.4 billion and £2.6 billion - which is below the £2.65 billion registered in financial 2022. It gave the guidance ‘in the form of a wider than usual range’ to reflect the uncertainties facing the business, such as inflation and normalising customer behaviour.
Peer J Sainsbury was down 2.8%. Ocado fell 3.2%.
In the midcaps, Darktrace was up 4.8% - the best performer in the FTSE 250 - as it was able to add 359 net new customers in the third quarter, leading to a ‘strong’ sales performance.
The cyber security firm ended the third quarter with 6,890 clients, a 37% year on year rise - thanks mainly to the recent acquisition of Cybersprint BV.
As a result, Darktrace said its constant currency annual recurring revenue at March 31 was $462.6 million, up 46% on the year before. Revenue in the third quarter, ended December 31, was $109.8 million - a 50% rise year on year. Year to date revenue totalled $302.4 million, a 51% annual rise.
Following the strong performance, Darktrace is slightly raising the top end of its financial 2022 revenue growth guidance and is narrowing the expected range. Darktrace now expects financial 2022 year-over-year revenue growth of between 45.5% and 47.0%, upped from its previously guided range of 44.5% to 46.5%.
Oxford Instruments advanced 4.2%. The firm expects its annual revenue and adjusted operating profit to be ‘marginally’ ahead of internal expectations.
Oxford Instruments, which makes scientific tools for research and industry, said the strong performance for the year ending March 31 comes despite supply chain disruption and cost inflation.
‘This full year performance reflects good progress in the second half of the financial year, with continued strong order growth, supported by resilient end-markets, leaving the group with a healthy order book as it enters the current financial year,’ the company added.
Oxford Instruments was recently the subject of a takeover bid by fellow FTSE 250 constituent Spectris. But the deal has since been called off, with Spectris backing off due to ‘significant uncertainty in global economic conditions’.
Plus500 unveiled a new share buyback programme to purchase up to an additional $50.0 million shares. Shares were up 1.0%.
The new programme will run alongside the company's most recent $55.0 million share buyback programme.
‘The purpose of the new share buyback programme is to further highlight the board's continued confidence in the future prospects of Plus500 and reflects its strong financial position, with the group's cash balances at $886.6 million, as at March 31, 2022. This confidence is supported by the significant operational and financial momentum achieved by Plus500 over recent years, as the group continues to make further progress on its strategic roadmap,’ the company explained.
On Tuesday, the online trading platform noted its revenue in the first quarter jumped a third, despite the firm seeing a 62% drop in new customers.
In mainland Europe, the CAC 40 in Paris was slightly higher, while the DAX 40 in Frankfurt was down 0.5%.
The euro was priced at $1.0835, down from $1.0863.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 1.9%. In China, the Shanghai Composite ended 0.8% lower, while the Hang Seng index in Hong Kong was down 0.1% in late trade%. The S&P/ASX 200 in Sydney ended up 0.3%.
Against the yen, the dollar was trading at JP¥126.13 early Wednesday, up from JP¥125.14 on Tuesday. The Japanese yen was trading around a two-decade low, the currency in recent weeks hit by a perfect storm of US Federal Reserve tightening, a dovish Bank of Japan, and the Ukraine war's impact on oil prices.
Brent oil was quoted at $104.03 a barrel on Wednesday morning, soft against $104.70 at the time of the equity market close in London on Tuesday.
Gold stood at $1,967.00 an ounce, lower against $1,973.44 late Tuesday.
Still to come in Wednesday's economic calendar are US producer price figures at 1330 BST.
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