Stock prices in London were largely lower at midday on Tuesday, following a pledge from ECB President Christine Lagarde for another interest rate increase next month.
The FTSE 100 index was down 3.17 points at 7,450.41. The FTSE 250 was up 25.51 points, or 0.1%, at 18,000.18, while the AIM All-Share was down 3.09 points, or 0.4%, at 757.77. Earlier in the day, all three indices had traded in the green.
The Cboe UK 100 was flat at 743.65, the Cboe UK 250 was flat at 15,782.19, and the Cboe Small Companies was flat at 12,979.28.
ECB President Christine Lagarde said it was ‘unlikely’ policymakers could state soon when interest rates had peaked as they battle stubbornly high inflation, and pledged yet another hike in July.
‘It is unlikely that in the near future the central bank will be able to state with full confidence that the peak rates have been reached,’ she said at the start of an annual gathering of central bank chiefs and economists in Sintra, southern Portugal.
The ECB’s policy would be decided ‘meeting by meeting’, she said, but added that ‘barring a material change to the outlook, we will continue to increase rates in July’, at the bank’s next meeting.
At its meeting earlier this month, the Frankfurt-based central bank hiked interest rates in the eurozone by 25 basis points. In a press conference shortly after the announcement, Lagarde was clear that the ECB was not finished with its current tightening cycle.
The euro was stronger against the dollar around midday on Tuesday, as markets viewed the ECB as the more hawkish central bank when compared to the US Federal Reserve.
The euro stood at $1.0941 around midday in London, higher against $1.0913 at the London equities close on Monday.
Stephen Innes, managing partner at SPI Asset Management, explained that when foreign exchange conversations revolve around rate hikes, the ‘most aggressive’ central bank would lead to a stronger currency ‘even if the growth outlook weakens’. This, he added, should put sterling and the euro at the top of the G-10 pack.
The pound was quoted at $1.2726, higher compared to $1.2719 at the London equities close on Monday.
Against the yen, the dollar was trading at JP¥143.80, higher compared to JP¥143.52. The dollar has been outperforming the yen in recent weeks after the Bank of Japan left its ultra-loose monetary policy unchanged earlier in June.
In European equities, stocks in Paris and Frankfurt were virtually flat. The CAC 40 in Paris was marginally higher, while the DAX 40 in Frankfurt was marginally lower.
In London, JD Sports remained the worst blue-chip performer at midday, down 4.8%, after reporting a moderation in sales growth in May and softening of trade in North America.
The sportswear retailer reported overall growth in organic sales at constant exchange rates of around 8% in May, compared to organic sales growth at constant exchange rates of more than 15% in the first three months of the year.
JD said the moderation in sales growth during the month reflected tougher comparatives in the year prior as the supply chain normalised and the availability of product improved.
It also noted that there had been some softening of trade in North America, which partially offset positive trends in the UK, Europe and the Asia Pacific region.
Among the FTSE 100’s top performers at midday was Informa, up 1.6% after Berenberg reinitiated the publishing and events firm’s stock at ’buy’.
Berenberg said that Informa is now emerging as a ‘different company’ than the one that entered 2020 and applauded the firm’s ‘well-executed’ mergers and acquisitions activity in a report on Tuesday.
In the FTSE 250, Telecom Plus added 6.9% after it reported an ‘outstanding’ year, with sharp rises in both annual profit and revenue.
The multi-utilities firm posted a pretax profit of £85.5 million, up sharply from £47.2 million the year prior, and revenue of £2.5 billion, more than double the £967.4 million achieved the previous year.
Telecom Plus said the ‘record’ revenue and profit reflected the strong double-digit growth in customer and service numbers and significant rises in the Ofgem energy price cap over the period.
‘There has been a lot of noise around energy prices recently, which is not surprising, but this has deflected from the underlying strengths of the business as well as the consistency of the model...The current discount rating is not likely to last long, in our view,’ said Peel Hunt analyst Charles Hall.
Elsewhere in London, Wise jumped 18% after it reported a significant surge in annual profit in the financial year that ended March 31, supported by solid growth in active customers.
The money transfer firm reported pretax profit of £146.5 million, multiplied from £43.9 million the year prior. Revenue climbed 51% to £846.1 million from £559.9 million.
This came as the company upped its active customer number by 34% year-on-year to around 10 million.
On AIM, Unbound plunged 29% after it announced it had closed its formal sales process, having received no potential offers that it considered capable of obtaining shareholder and stakeholder support.
The company added that the strategic review process for Unbound’s main operating subsidiary continues, but noted that offers within this process may result in ‘little or no recovery of value’ for shareholders.
Unbound is the parent company for a retail group selling a range of brands focused on the 55 plus demographic, including Hotter Shoes.
Stocks in New York were called largely higher on Tuesday. The Dow Jones Industrial Average was called flat, while the S&P 500 index was called up 0.2%, and the Nasdaq Composite up 0.4%.
Brent oil was quoted at $73.64 a barrel at midday in London on Tuesday, down from $74.12 late Monday. Gold was quoted at $1,923.89 an ounce, lower against $1,926.27.
Still to come on Tuesday’s economic calendar, the US consumer confidence survey is released at 1500 BST.
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