Some good news for the UK economy wasn't enough to push London stocks higher early Wednesday, as investors hunker down for US inflation figures in the afternoon.
A hot reading could prompt the Federal Reserve to enact its second-successive 75 percentage point rate hike when it meets later this month.
Meanwhile, pub chain JD Wetherspoon warned of a worse-than-expected annual loss, due to a rising wage bill and a slow pick-up in beer sales.
The FTSE 100 was down 53.01 points, or 0.7%, at 7,156.85. The FTSE 250 index was down 55.57 points, or 0.3%, at 18,799.39. The AIM All-Share index was down 1.16 points, or 0.1%, at 880.92.
The Cboe UK 100 index was down 0.7% at 713.63. The Cboe 250 was down 0.2% at 16,373.69, and the Cboe Small Companies was 0.8% lower at 13,128.88.
In mainland Europe, the CAC 40 stock index in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 1.0%.
Equities in Asia ended mostly higher. In Tokyo, the Nikkei 225 rose 0.5%. In China, the Shanghai Composite rose 0.1%, while the Hang Seng in Hong Kong was down 0.1%. In Sydney, the S&P/ASX 200 closed 0.2% higher.
The US consumer price index for June is released at 1330 BST. Inflation is expected to have ticked up to 8.8% from 8.6% in May.
Swissquote analyst Ipek Ozkardeskaya commented: ‘A further rise in the US consumer prices will certainly revive the Fed hawks today, push the US dollar higher and equities lower. A softer-than-expected figure, on the other hand, could revive hope that the US economy could experience a soft landing and result in a much-awaited pause in the dollar rally, and a rebound in equities before big US banks start releasing their quarterly results on Thursday.
‘In both cases, the market volatility will likely remain high, and the visibility likely remain low especially when you add the lower summer trading volumes into that mix.’
The next Fed policy meeting is on July 26 and 27.
The pound quoted at $1.1894 early Wednesday in London, down from $1.1906 late Tuesday, as sterling's earlier momentum waned.
The pound had risen as high as $1.1931 earlier in the morning, on the back of a decent UK gross domestic product figure.
The UK economy defied expectations and strengthened in May, figures on Wednesday showed, following a contraction in April.
According to the Office for National Statistics, UK GDP grew 0.5% monthly in May, following a 0.2% decline in April. April's figure was upwardly revised from an initially reported 0.3% fall.
The figure for May topped FXStreet-cited consensus, which had forecast the economy to register no monthly growth at all.
The latest GDP reading comes as UK leadership hopefuls jostle for position in the race to replace Prime Minister Boris Johnson.
Eight contenders will be on the ballot paper when Tory members of Parliament begin voting on Wednesday, the chair of the 1922 Committee, Graham Brady, said.
Rishi Sunak, Liz Truss, Tom Tugendhat, Kemi Badenoch, Penny Mordaunt, Jeremy Hunt, Nadhim Zahawi and Suella Braverman all secured the 20 nominations from fellow MPs needed to enter the contest.
The euro ebbed to $1.0009 early Wednesday from $1.0068 at the London equities close on Tuesday.
Against the yen, the dollar was quoted at JP¥137.11, up from JP¥136.66.
In London, AIM-listed shipping container tracking firm T42 IOT Tracking Solutions was among the standout performers, surging 43%.
It has signed a deal with a second Latin American distributor to provide shipping container tracking solutions to local port authorities for a four-year period starting 2023. The pact has a total value of $16 million.
Fellow AIM listing Distil slumped 19%. In its first quarter to June, the alcoholic spirits maker's volumes fell 79% yearly and its revenue dropped 81% to £120,000.
The figures reflect Distil's decision to handle all of its UK sales and marketing opportunities with retail customers, rather than through a third-party distributor.
Shares in Clarkson rose 8.3%, the best mid-cap performer.
The shipping services firm expects to top expectations for 2022.
It expects underlying pretax profit of £42 million for the six months ended June 30, up 53% from £27.5 million a year earlier.
Clarkson added: ‘Performance has been strong across all divisions, with the Broking division, which has a market-leading position in nearly all the key shipping sectors, performing particularly well. While mindful of macroeconomic conditions, the board nevertheless remains confident in the outlook for the business and expects results for the year ending 31 December 2022 to be materially ahead of its previous expectations.’
Bar and cafe owner Loungers reported an annual revenue surge, shaking off the effects of the Omicron variant, the 'pingdemic' and recruitment issues.
Revenue in the financial year that ended April 17 jumped to £237.3 million from £78.3 million in the lockdown-hit prior year.
Loungers swung to a pretax profit of GB21.6 million from a £14.7 million loss.
Shares in the company rose 4.1% in early dealings.
Elsewhere in the UK leisure sector, JD Wetherspoon lost 5.6%, the worst mid-cap performer.
The pub chain said sales of cocktails, spirits and food are on the up so far in its fourth quarter, though sales of typical pub-drink stalwarts such as draught ales, lagers and ciders were below pre-virus levels.
In the first 11 weeks of the fourth quarter ending July 31, like-for-like sales were 0.4% below pre-virus levels. This represented an improvement from the previous quarter, when sales were 4.0% lower.
Sales of spirits, cocktails and food were all higher compared to pre-Covid levels, up 4.4%, 19% and 2.1%, respectively.
‘But sales of draught ales, lagers and ciders, historically the largest contributors to pub sales, were 8.0% below 2019,’ Wetherspoon added.
‘Many people predicted a boom in pub sales when lockdowns and restrictions ended, due to pent-up demand, but recovery for many companies has been slower and more laborious than was anticipated,’ the company cautioned.
The company warned its loss for the year will be chunkier than expected, at £30 million on a post-IFRS 16 basis. IFRS 16 is an accounting rule related to leases.
‘Although sales now match 2019, labour costs are far higher,’ it added, though it expects costs for financial 2023 to rise at a slower pace than the current inflation rate.
Brent oil was trading at $100.29 a barrel early Wednesday - back above the $100 level, below which it had slipped overnight - but down from $100.37 late Tuesday. Gold stood at $1,724.81 an ounce, down from $1,732.30.
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