European equities came under pressure on Thursday afternoon after a hotter-than-predicted US inflation reading, souring what had been a positive morning for stocks.
The FTSE 100 still managed to end in the green, with oil majors leading the way. The FTSE 250 tumbled after the US data, despite hitting a 10-day high earlier in the session.
The FTSE 100 index added 24.75 points, 0.3%, at 7,644.78. The FTSE 250 slipped 40.55 points, 0.2%, at 17,835.69, though it had been 1.1% higher heading into the afternoon. The AIM All-Share slipped just 0.12 of a point at 695.57.
The Cboe UK 100 rose 0.3% at 763.72, the Cboe UK 250 lost 0.4% at 15,482.42, though the Cboe Small Companies ended down 1.1% at 12,904.15.
In European equities on Thursday, the CAC 40 in Paris lost 0.4%, while the DAX 40 in Frankfurt fell 0.2%.
In New York, the Dow Jones Industrial Average was down 0.2%, the S&P 500 a touch lower, while the Nasdaq Composite climbed 0.2%.
Sterling was quoted at $1.2209 late Thursday afternoon in London, tumbling from $1.2309 at the London equities close on Wednesday. The euro traded at $1.0547, down against $1.0622. Versus the yen, the dollar surged JP¥149.77, from JP¥149.01.
The yearly inflation rate was unmoved at 3.7% in September, according to the Bureau of Labor Statistics. It had been expected to cool to 3.6%, according to FXStreet-cited consensus.
The US inflation rate steadily declined after hitting a recent peak of 9.1% in June of last year. It cooled to 3.0% in June of this year, but climbed to 3.2% in July and 3.7% in August.
Excluding food and energy, the yearly inflation rate eased to 4.1% in September, from 4.3% in August, as expected.
Oxford Economics analyst Michael Pearce commented: ‘The rise in consumer prices in September was stronger than anticipated, but with most of that driven by higher energy prices and a surprise rebound in shelter inflation, both of which we expect to be partly reversed in coming months, the trend in inflation is still down. This report will not change the message from Fed officials in recent days that they can afford to be patient.’
Gold was quoted at $1,871.43 an ounce late Thursday afternoon, falling from $1,872.58 on Wednesday. The precious metal had been boosted by a flight to safety earlier this week following events in the Middle East, though the stronger dollar was a headwind on Thursday. The dollar and gold have an inverse relationship.
Brent oil was trading at $86.58 a barrel late Thursday, higher against $85.84 late Wednesday.
BP and Shell ended among the FTSE 100’s best performers, up 3.0% and 1.3%, tracking Crude prices higher.
Among mid-caps, Mobico, formerly known as National Express, plunged 28%.
Mobico said it now expects annual earnings before interest and tax to come within a range of £175 million to £185 million, having previously guided for operating profit of £200 million to £215 million. It also suspended its final dividend.
Chief Executive Officer Ignacio Garat said: ‘The board is keenly aware of the importance of dividends to shareholders and the decision to suspend the final dividend was not taken lightly. The board will continue to consider the dividend position as progress is made on deleveraging.’
easyJet’s wings were clipped despite predicting decent annual results and announcing it will reinstate its dividend.
In a trading update for the financial year that ended September 30, the Luton Airport-based budget airline didn’t comment on the fire in a car park at the airport north of London that resulted in hundreds of cancelled flights on Tuesday and Wednesday.
It said headline pretax profit for the recent year will be between £440 million and £460 million. This would be a swing from a loss of £178 million in financial 2022 and a loss of £208 million in financial 2021 in the wake of the Covid-19 pandemic.
The annual result is thanks to headline profit of £650 million to £670 million in the fourth quarter of the recent financial year and profit of £850 million to £870 million in the second half as a whole.
Analysts at UBS commented: ‘The FY23 guidance is at the midpoint of consensus, but we think buyside investors might have expected better performance for FY23.
‘However, restoration of dividend, net cash position, outlook and medium-term targets are likely supportive for the shares.’
easyJet outlined an ‘ambitious roadmap to serve more customers and deliver attractive shareholder returns’.
‘Our new medium-term targets provide the building blocks to deliver a PBT greater than £1 billion. This will be driven by reducing winter losses, up-gauging our fleet and growing easyJet holidays,’ Chief Executive Officer Johan Lundgren said. ‘As part of our commitment to shareholder returns, the board intends to reinstate dividends commencing with the FY23 results.’
easyJet last paid a dividend for financial 2019. It was 43.9 pence per share, which had represented a 25% cut from financial 2018.
easyJet shares fell 7.0%.
Restaurant Group shares jumped 36% 65.80 pence. The Wagamama owner agreed to be acquired by funds managed by private equity firm Apollo Global Management, soon after having itself sold off an underperforming business.
Apollo is offering to pay 65 pence per Restaurant Group share in cash. The offer values the equity of Restaurant Group at £506 million and the company as a whole, including debt, at an enterprise value of £701 million.
The company said its board unanimously recommends the offer to shareholders, and acceptances for it already have been received from shareholders representing 19.9% of its total.
Only a month ago, Restaurant Group said it had agreed to sell its ‘challenged’ Frankie & Benny’s and Chiquito chains to the owner of Bella Italia, Las Iguanas and Banana Tree, saying this would reduce its debt and improve its profit margin.
Edison analyst Russell Pointon commented: ‘Whilst the share price has responded positively to more encouraging trading and management tidying up the portfolio, leading to Restaurant Group being one of the best performers in the sector year-to-date, the proposed offer by Apollo of 65p is roughly half the levels that the share price was trading at prior to Covid, whilst consensus profit estimates for the coming years are heading back to pre-Covid levels of 2017 and 2018.
‘So, it will be interesting to see how the activist shareholders respond to the deal. The fact the share price has moved to a premium to the offer price indicates the market thinks a high offer will be required.’
Friday’s economic calendar has a Chinese inflation reading overnight, before eurozone industrial production data at 1000 BST.
The UK corporate diary has a trading statement from emerging markets-focused asset manager Ashmore.
Over in New York, the banking sector comes into focus, with third-quarter results from JPMorgan Chase, Wells Fargo and Citi.
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