Share prices in London opened slightly lower on Wednesday amid downbeat outlooks from companies such as Aveva and Wizz Air; however Melrose Industries was bucking the downtrend in the FTSE 100.
The FTSE 100 index was down 8.64 points, or 0.1%, at 7,590.45. The mid-cap FTSE 250 index was down 21.83 points, or 0.1%, at 20,377.60. The AIM All-Share index was up 2.97 points, or 0.3%, at 975.96.
The Cboe UK 100 index was down 0.1% at 757.04. The Cboe 250 was flat at 18,097.62, and the Cboe Small Companies was up 0.1% at 14,773.25.
In mainland Europe, the CAC 40 in Paris was down 0.2% and the DAX 40 in Frankfurt was down 0.3%.
In the FTSE 100, Melrose was the best performer, up 7.1%, after the industrial turnaround specialist launched a £500 million share buyback.
Melrose on Monday said it had agreed to offload its Ergotron business to funds managed by Sterling Group, in a $650 million deal.
Back in March, Melrose had delayed a promised shareholder return, pointing to market uncertainty due to the war in Ukraine, saying a future cash return was being kept under review.
Following the business disposal and its ‘ongoing strong financial position’, Melrose said it was satisfied that it had ‘sufficient certainty’ in order to begin a buyback programme.
‘Having agreed the sale of Ergotron, we are now in a position to again distribute capital to our shareholders and have chosen the quickest way to start to achieve that goal. We will continue to keep under review the appropriate capital structure of Melrose as we position for continuing success,’ said Chief Executive Simon Peckham.
Conversely, Aveva was down 1.2% after the industrial software provider warned on revenue growth for financial 2023.
For the financial year that ended March 31, revenue rose by 45% to £1.19 billion from £820.4 million the year before, but Aveva swung to a pretax loss of £18.6 million from a £34.2 million profit.
Annual adjusted earnings before interest and tax was £365.1 million, up 2.9% from £354.7 million last year.
Looking ahead, Aveva said adjusted Ebit for financial 2023 will be hurt by some additional costs. These include wage inflation due to ‘very competitive’ software labour market conditions. Aveva said revenue growth is expected to be lower in financial 2023 than in 2022 on an organic constant currency basis, and its adjusted Ebit margin is expected to narrow, before resuming growth in 2024.
In the FTSE 250, Wizz Air was down 2.5%, after the eastern Europe-focused airline posted a widened annual loss but pledged extra resources to help deal with the chaotic travel disruption seen at airports.
For the financial year ended March 31, revenue was €1.66 billion, up from €739.0 million in financial 2021, but its pretax loss widened to €641.5 million from €566.5 million.
Looking ahead, Wizz Air said it sees strong consumer demand for the summer, but expects an operating loss for the first quarter of financial 2023.
‘The industry is witnessing supply-chain issues across airports, including in our network. Shortages of staff in air traffic control, security and other parts of the supply-chain are impacting airlines, our employees and our customers directly. We are deploying extra resources to minimize disruptions and urge all other stakeholders to do the same, having customers' best interests always in mind,’ said Chief Executive Jozsef Varadi.
On AIM, Keywords Studios was up 1.5% after the video game industry services company agreed to buy US game development studio Forgotten Empires for up to $32.5 million.
Keywords will pay $15.8 million in cash initially, plus a mix of cash and shares based on performance in the first year. Ohio-based Forgotten Empires had $7.2 million in revenue in 2021. It has 53 game developers and worked on games such as Age of Empires and Age of Mythology.
In Asia on Wednesday, the Nikkei 225 index in Tokyo closed up 1.0%. In China, the Shanghai Composite closed up 0.7%, while the Hang Seng index in Hong Kong was up 2.0%. The S&P/ASX 200 in Sydney ended up 0.4%.
The pound was quoted at $1.2567 early Wednesday, marginally down from $1.2576 at the London equities close Tuesday.
The euro was priced at $1.0691, unmoved from $1.0692. Against the yen, the dollar was trading at JP¥133.25 in London, higher against JP¥132.57.
The World Bank has sharply slashed its annual growth forecast for China, warning in a report Wednesday that Covid disruptions could further slow recovery in the world's second-largest economy.
China is the last major economy wedded to a zero-Covid policy, using rapid lockdowns, mass testing and strict movement restrictions to eliminate outbreaks - but it has tangled supply chains and dragged economic indicators to their lowest levels in around two years.
Economic growth in China is projected to slow to 4.3% in 2022, the World Bank said in a report on Wednesday, marking a steep 0.8 percentage-point drop from the December forecast.
The World Bank has also cut its global economic growth forecast to 2.9%, warning that the world economy risks falling into a harmful period of 1970s-style ‘stagflation’ in the wake of the Russian invasion of Ukraine.
In the UK, Prime Minister Boris Johnson is to face Parliament on Wednesday for the first time since the damaging revolt by Tory MPs in Monday's confidence vote.
Johnson's backers can be expected to stage a noisy show of support when he steps up for his weekly Commons questions.
But behind the scenes, tensions are running high after 40% of Conservative MPs refused to support him in the vote of confidence. Even though Johnson survived, by 211 votes to 148, critics warned that he had been severely wounded by the scale of the rebellion and could be gone before the end of the year.
After Johnson insisted on Tuesday it remained a ‘fundamental Conservative instinct’ to cut taxes, UK Chancellor Rishi Sunak used a speech to the Onward think tank to reaffirm his intention to reduce taxes for business in the autumn.
The Daily Telegraph reported that allies of Johnson were urging him to replace Sunak with former foreign secretary Jeremy Hunt.
Brent oil was quoted at $121.02 a barrel Wednesday morning, up from $120.11 late Tuesday. Gold stood at $1,849.45 an ounce, down from $1,850.60.
Wednesday's economic calendar has eurozone GDP at 1000 BST.
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