European stocks were on shaky ground heading into Tuesday's highly-anticipated US inflation release, which is expected to shore up forecasts for aggressive central bank tightening in the coming months.
‘Another day, another decline for key equity indices. European stocks were in the doldrums as investors fretted about inflation, politics, consumer spending and more,’ Danni Hewson, financial analyst at AJ Bell, said.
‘Corporate news flow is picking up which is giving investors a reason to want to trade the markets, but mixed messages from these businesses is making it hard to call which way equities will move next.’
The FTSE 100 index was down 36.87 points, or 0.5%, at 7,581.44 around midday on Tuesday. The mid-cap FTSE 250 index was down 159.03 points, or 0.8%, at 20,956.05 while the AIM All-Share index was down 1.40 points, or 0.1%, at 1,054.13.
The Cboe UK 100 index was down 0.4% at 755.03. The Cboe 250 was down 0.7% at 18,448.60, and the Cboe Small Companies down 0.3% at 15,380.46.
Stocks in New York were pointed to a mixed open on Tuesday ahead of the crucial inflation data. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 flat, and the Nasdaq Composite seen opening 0.2% higher.
US consumer prices will be released at 1330 BST.
The White House has already issued a warning ahead of the annual inflation rate reading, which is expected to accelerate to 8.5% in March from 7.9% in February. ‘We expect March headline inflation to be extraordinarily elevated,’ White House Press Secretary Jen Psaki told reporters ahead of the release.
The dollar was on the front foot heading into the figures. Against the yen, the dollar was trading at JP¥125.56 in London, higher from JP¥125.52.
The pound was quoted at $1.3020 midday Tuesday, down from $1.3040 at the London equities close on Monday.
The UK unemployment rate for the three months to February was 3.8%, falling below the 3.9% registered for the three months to January. Market forecasts - according to FXStreet - had predicted unemployment to remain steady at 3.9%.
The number of job vacancies in January to March 2022 rose to a new record of 1.3 million.
James Smith, developed markets economist at ING, said: ‘The UK jobs market is undeniably hot right now. The unemployment rate is now at 3.8%, which equals the multi-decade lows seen just before the pandemic. There's now also one vacancy for every unemployed person, the first time this milestone has been reached since the data began in the early-2000s.
‘Unsurprisingly wage growth is running at, or a little faster, than it was pre-Covid, judging by the recent three-month annualised growth rates. That's been a key factor behind the three consecutive Bank of England rate hikes, and likely means we should expect one or two more before the summer.’
In mainland Europe, the CAC 40 in Paris was down 0.8%, while the DAX 40 in Frankfurt was down 1.1%.
Two of Germany's banking heavyweights were suffering on Tuesday, with reports of an undisclosed investor in Deutsche Bank and Commerzbank selling stakes in both companies, Reuters said on Tuesday.
The news sent the share prices of both sinking, with Deutsche down 8.4% and Commerzbank falling 8.3%.
Reuters reported that the shareholder has sold 116 million shares in Deutsche Bank and 72.5 million shares in Commerzbank, shedding stakes worth more than 5% in both banks. The sales come as both banks have started to implement turnaround strategies to lift profitability and restore investor confidence.
According to information from the sale's bookrunner Morgan Stanley, the sales resulted in proceeds of €1.75 billion.
Adding further pressure to the DAX, consumer prices in Germany rose at their fastest level since reunification, the federal statistics office confirmed, piling pressure on the European Central Bank to counteract a run of red hot inflation readings.
Destatis figures showed annual consumer inflation had run to 7.3% in March, ahead of the 5.1% figure seen in February - but was in line with market forecasts, according to FXStreet.
Destatis noted March's reading saw inflation reach its highest level since German reunification as energy prices continue to soar.
Capital Economics chief Europe economist Andrew Kenningham said: ‘Final inflation data for Germany in March and the first survey of economic sentiment for April underline the acute problems which the German economy now faces. Energy inflation and underlying price pressures are rising even as economic activity is in danger of contracting.’
The euro was priced at $1.0872, down from $1.0889.
In London, Electrocomponents was 1.6% higher after it confirmed it expects over 25% like-for-like revenue growth for financial 2022.
The FTSE 100-listed London-based distributor of industrial and electronics products said its like-for-like revenue will jump 26% in the year ended March 2022, after a solid end to the year with 23% growth in the fourth quarter.
Electrocomponents noted its growth in the final quarter advanced from the third quarter's 21% growth, but was unable to match its performance in either the second or first quarters. First quarter sales surged 37% and second quarter sales were up 26%.
Diploma was atop the mid-caps, up 9.7%, after it said that it expects full-year revenue growth to be significantly ahead of its previous guidance.
The London-based specialised technical products and services company said it has seen double-digit underlying growth in the second quarter - in line with its first quarter performance - driven by ‘robust’ demand and market share gains.
Looking ahead, Diploma said it anticipates low double digit underlying revenue growth and reported revenue growth a ‘little over’ 20%. This would exceed its previous guidance of revenue growth of around 10% including mid-single digit underlying revenue growth.
Online trading platform Plus500 advanced 4.6% as its revenue in the first quarter jumped a third, despite the firm seeing a 62% drop in new customers.
Revenue for the three-month period to March 31 rose 33% year-on-year to $270.9 million from $161.1 million, with earnings before interest, tax, depreciation and amortization also rising 33% to $161.6 million from $70.9 million.
Plus500 recorded a 62% year-on-year drop in new customers in the first quarter to 33,740 from 89,406, but noted a 2% rise from the fourth quarter of financial 2021.
Active customers were down 35% to 176,642 from 269,743, but, again, were up on the fourth quarter - rising 3%. Average revenue per user more than doubled year-on-year to $1,534 from $753.
‘At the current time, the board anticipates that revenue for financial 2022 will be ahead of current market expectations and continues to expect that Plus500 will deliver sustainable growth from all of the group's product offerings over the medium to long term,’ Plus500 added.
Peer IG Group gave back 1.6%, while CMC Markets was up 1.1%.
Brent was quoted at $102.64 a barrel midday Tuesday, up sharply from $98.80 a barrel Monday evening. Gold stood at $1,956.00 an ounce, higher against $1,952.48 late Monday.
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