Stocks in Europe were treading water at Wednesday’s market open, as investors looked ahead to the latest US inflation print, which will be sure to inform the projected path of interest rates.
The FTSE 100 index opened up 3.70 points at 7,531.23. The FTSE 250 was down 20.18 points, 0.1%, at 18,522.12, and the AIM All-Share was down 0.38 of a point, 0.1%, at 742.83.
The Cboe UK 100 was up marginally at 750.43, the Cboe UK 250 was down marginally at 16,163.06, and the Cboe Small Companies was down 0.1% at 13,432.24.
In European equities on Wednesday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both down 0.1%.
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.1%, the S&P 500 down 0.6% and the Nasdaq Composite down 1.0%
Traders were cautious ahead of an incoming US consumer price inflation print on Wednesday which could impact expectations around the future of interest rates in the world’s largest economy.
According to FXStreet-cited consensus, headline CPI is expected to accelerate to 3.6% on an annual basis in August from 3.2% in July.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said the reading ‘will be very important in terms of where the Federal Reserve (Fed) expectations will be headed, especially for the November meeting.’
Currently, markets see a 93% chance of interest rates standing pat at the Federal Reserve’s next meeting, according to the CME FedWatch Tool.
At the following meeting in November, however, markets see a 59% chance of the Fed lifting rates by 25 basis points.
The recent rise in oil prices is also fueling fears of a return to inflationary pressures in the global economy. Brent oil was quoted at $92.43 a barrel early in London on Wednesday, up from $92.26 late Tuesday.
Meanwhile, the UK economy contracted by more than expected in July, according to the Office of National Statistics.
Monthly gross domestic product contracted by 0.5% in July, having grown by 0.5% in June. This came in worse than FXStreet-cited consensus, which had expected just a 0.2% contraction in GDP for July.
The main contributor to July’s fall was a 0.5% contraction in services output, after growth of 0.2% in June, the ONS explained.
‘The UK’s hokey cokey economy isn’t making life easy for businesses or central bankers,’ said Nicholas Hyett, investment analyst at Wealth Club.
‘With growth bouncing up and then down and interest rate rises ruled in and then out, forward planning is difficult. That tends to make businesses nervous and keen to preserve cash – bad news for future economic growth and investment.’
The pound was quoted at $1.2457 early on Wednesday in London, lower compared to $1.2477 at the equities close on Tuesday. The euro stood at $1.0743, up against $1.0729. Against the yen, the dollar was trading at JP¥147.36, higher compared to JP¥147.13.
Gold was quoted at $1,910.01 an ounce, lower against $1,912.01.
In the FTSE 100, Aviva rose 2.9%.
It said it has agreed to sell its 25.9% stake in Singapore Life, together with two debt instruments, to Sumitomo Life Insurance Company for £800 million.
‘This is a good outcome for Aviva. The transaction further simplifies the business and we are in a very strong position to build on our trading momentum in the UK, Ireland and Canada,’ said Chief Executive Officer Amanda Blanc.
BP shed 0.9%, after it said its CEO Bernard Looney has resigned ‘with immediate effect’, after admitting that he had not been ‘fully transparent’ about historical relationships with colleagues.
‘Bernard Looney has notified the company that he has resigned as chief executive officer with immediate effect,’ the company said in a statement, adding that finance chief Murray Auchincloss would act as interim CEO.
Looney is leaving the energy firm after less than four years in the role.
BP said that in May last year its board received and reviewed allegations from an anonymous source relating to Looney’s conduct ‘in respect of personal relationships with company colleagues’.
In the FTSE 250 index, Renishaw lost 2.2%, after it delayed the publication of its results.
It said that it will now publish its results for the first half of 2023 on Tuesday next weekend, instead of on Wednesday this week. It expects revenue and adjusted pretax profit to be within previous guidance.
Amongst London’s small-caps, On the Beach jumped 13%.
The beach holiday retailer said that in its financial year ending September 30, it will deliver record revenue and total transaction value. This performance has been underpinned by enhanced platform capabilities and a well-executed strategy across brand and proposition, it noted.
‘We continue to leverage the benefits of the investments we have made in our proprietary technology platform, brand and proposition and I am pleased to see that this has driven growth in both the top and bottom lines during the second half of the year as planned. Alongside access to greater seat and bed capacity, this has resulted in our most successful summer, sending more passengers on their holidays than ever before,’ said CEO Shaun Morton.
In Asia on Wednesday, the Nikkei 225 index in Tokyo closed up 1.0%. In China, the Shanghai Composite closed down 0.2%, while the Hang Seng index in Hong Kong was down 0.2% in late trade. The S&P/ASX 200 in Sydney closed down 0.7%
The economic calendar has EU industrial production data at 1000 BST.
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