Stock prices in London opened lower on Wednesday, as inflation in the UK remained stubbornly high, while heightened tensions in the Middle East also weighed on sentiment.
The FTSE 100 index opened down 23.28 points, 0.3%, at 7,651.93. The FTSE 250 was down 130.79 points, 0.7%, at 17,558.67, and the AIM All-Share was down 1.63 points, 0.2%, at 688.95.
The Cboe UK 100 was down 0.4% at 764.11, the Cboe UK 250 was down 0.7% at 15,241.39, and the Cboe Small Companies was up 1.5% at 13,003.91.
In European equities, the CAC 40 in Paris and the DAX 40 in Frankfurt were both down 0.1%.
The Office for National Statistics said consumer prices rose 6.7% annually in September, matching the rate seen in August. Market forecasts, as cited by FXStreet, had expected the figure to cool to 6.5% last month.
‘Large downward effects from food and non-alcoholic beverages and furniture and household goods were largely offset by upward contributions from transport, and restaurants and hotels,’ the ONS explained.
On a monthly basis, prices ticked up 0.5% in September, which was ahead of forecasts of 0.4%. It was also higher than the 0.3% monthly rise seen in August.
Core consumer prices, which exclude energy, food, alcohol and tobacco, rose by 6.1% annually in September. This was cooler than the 6.2% rise in August, but higher than forecasts of 6.0%.
‘Today’s inflation data will undoubtedly heap pressure back on the Bank of England to continue raising interest rates at upcoming Monetary Policy Committee meetings...While the broad downtrend that we’re witnessing in UK inflation remains intact, this easing in price pressures appears to be occurring at a far more gradual pace than policymakers would have hoped,’ said Matthew Ryan, head of Market Strategy at global financial services firm Ebury.
‘We continue to see very little chance of any change in rates when the BoE next convenes early next month, as officials will likely wish to wait for additional data before deciding on the next policy move.’
The pound was stronger, with sterling quoted at $1.2205 early Wednesday, rising from $1.2191 at the London equities close on Tuesday.
The euro was unchanged at $1.0581 early Wednesday. Against the yen, the dollar was quoted at JP¥149.70, down slightly versus JP¥149.74.
The interest rate worries in the UK sent shares in housebuilders lower, with Barratt down 1.9%, Taylor Wimpey losing 1.5% and Berkeley down 1.4%.
A gloomy trading update from Barratt didn’t help matters, as the Leicestershire-based firm warned it expects the difficult backdrop to continue for the coming months. It guided for an at least 17% drop in completions in financial 2024 from the prior year.
It was a better morning for Whitbread, with its shares gaining 3.6%.
In its half-year which ended August 31, the Premier Inn hotel chain owner said revenue climbed 17% annually to £1.57 billion from £1.35 billion, citing strong UK hotel demand and an expected slow recovery in supply following the pandemic. Pretax profit jumped 29% to £395 million from £307 million.
Whitbread raised its interim dividend by 40% to 34.1 pence, and announced a new £300 million share buyback programme. The first £150 million tranche is due to start on Wednesday and end in late January.
The visibility on the UK supply outlook ‘underpins [its] confidence in the outlook for financial 2024 and beyond’, the firm said.
In the FTSE 250, Marshalls rose 6.6%.
The building products manufacturer backed its annual expectations, as it reported the rate of like-for-like revenue contraction eased to 9% in the third quarter from 13% over the first half. In the first nine months, revenue fell around 3% to £528 million from £544 million a year prior.
The firm had taken ‘decisive actions’ to achieve around £9 million in annualised savings, including closing a factory, reducing shifts and capacity in other facilities, and reorganising its commercial team focused on simplifying the business.
Among London’s small-caps, Kin & Carta jumped 41% to 110p.
The London-based business consultancy said it has accepted a takeover offer from Kelvin UK Bidco, a newly formed company owned indirectly by funds advised by UK private equity firm Apax Partners.
Kin & Carta will receive 110 pence in cash for each share, which constitutes a 41% premium to its closing price of 78p on Tuesday. The offer values the company at around £203 million on a fully diluted basis.
‘The changing economic backdrop has highlighted the importance of scale and diversification in the [Digital Transformation] sector. Apax believes that as a private company Kin & Carta will be better placed to make the investments necessary to position the business for long-term success,’ the firms said.
Meanwhile, the global economy could face renewed inflationary pressures, as tensions run high in the Middle East, driving up oil prices overnight. Brent oil was trading at $91.38 a barrel early Wednesday, rising from $89.41 late Tuesday.
US President Joe Biden’s wartime trip to Israel and Jordan faltered before it got off the ground, after the Amman leg was canceled following a strike on a Gaza hospital that killed hundreds of people.
The trip was always set to be the riskiest of Biden’s presidency as he tried to juggle support for Israel after the October 7 Hamas attacks with efforts to prevent a humanitarian disaster in Gaza and to avert a wider war. But his regional balancing act came undone on the eve of his visit with news of the hospital explosion.
Health authorities in Gaza said the explosion at the Ahli Arab Hospital killed between 200 and 300 people and was caused by the latest in a wave of Israeli airstrikes. Hamas said in a statement 500 had died. Israeli Defense Forces blamed Palestinian militants, saying an outgoing Islamic Jihad rocket misfired.
The strike has attracted widespread condemnation, though Western leaders fell short of apportioning blame. EU leader Ursula von der Leyen, German Chancellor Olaf Scholz and UK foreign secretary James Cleverly were among those calling for an investigation of the incident.
The tensions in the Middle East come amid a steady stream of geopolitical developments. The US said it would tighten its export curbs on AI chip exports to China, helping to drag down semiconductor stocks, such as Nvidia, which fell 4.7% in New York. The US also accused China of orchestrating a ‘concerted’ campaign of dangerous and provocative air force manoeuvres against US military planes in international airspace.
Late Tuesday, Volodymyr Zelensky said Ukraine’s armed forces had used US-supplied ATACMS long-range missiles for the first time. The US had not previously said publicly that it had delivered the missile systems to Kyiv. Russia’s US ambassador warned the move was ‘a grave mistake’.
Meanwhile, Chinese President Xi Jinping on Wednesday told Russian President Vladimir Putin that ‘political mutual trust’ between their countries was ‘continuously deepening’, at Beijing’s Belt & Road Initiative Forum. Further, Xi announced it will inject a further $100 billion of new funding into the initiative, aimed at expanding China’s clout overseas.
In Asia on Wednesday, the Nikkei 225 index in Tokyo closed marginally higher. In China, the Shanghai Composite closed down 0.8%, while the Hang Seng index in Hong Kong closed down 0.2%. The S&P/ASX 200 in Sydney closed up 0.3%.
Markets in Asia were also digesting stronger-than-expected Chinese economic data.
China’s economy grew more than expected in the third quarter, data showed, but the reading was still below target and officials continue to face calls for more stimulus while struggling to contain an unprecedented property crisis. The 4.9% expansion in July-September was higher than expectations of 4.4%, according to FXStreet-cited consensus. It was slower than the 6.3% in the second quarter, however. Quarterly economic growth picked up to 1.3%, above forecasts of 1.0%, and beat 0.8% in the second quarter.
Retail sales, the main indicator of household consumption, which the National Bureau of Statistics said rose a better-than-expected 5.5% on-year in September. This was better than forecasts of 4.9%, and faster than the 4.6% recorded for August.
Gold was quoted at $1,938.32 an ounce early Wednesday, higher than $1,924.08 on Tuesday.
In the US on Tuesday, Wall Street ended mixed, with the Dow Jones Industrial Average marginally higher, while the S&P 500 was flat, and the Nasdaq Composite shed 0.3%.
Still to come in the economic calendar, there is a eurozone inflation reading at 1000 BST.
The New York corporate calendar has third quarter results from Morgan Stanley, Netflix and Tesla, plus first quarter results from Proctor & Gamble.
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