Share prices in London, Paris and Frankfurt were finding their footing early Thursday, after an unexpectedly high US inflation reading earlier in the week had sent markets reeling.
US retail sales figures, due at 1330 BST on Thursday, will provide a hint at what the Federal Reserve’s response will be when the US central bank decides interest rates next week.
In early UK company news, shares in food packaging firm Hilton Food Group and online beauty retailer THG tumbled after both issued guidance downgrades.
The FTSE 100 index was up 50.10 points, or 0.7%, at 7,327.40 early Thursday. The mid-cap FTSE 250 index was up 102.26 points, or 0.5%, at 18,951.46. The AIM All-Share index was up 1.23 points, or 0.1%, at 869.57.
The Cboe UK 100 index was up 0.7% at 731.89. The Cboe 250 was up 0.3% at 16,322.35, and the Cboe Small Companies flat at 13,631.75.
In mainland Europe, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was up 0.4% early Thursday.
European markets were rebounding after a higher-than-expected inflation print in the US earlier this week, which showed the core rate of inflation continuing to rise.
The surprise inflation data sparked fears that the Fed could surprise with a full percentage point interest rate hike next week. However, the majority of analysts still expect a 75 basis point hike.
Investors will now be looking to US retail sales to assess how well consumers are holding up in the face of inflationary pressures.
The dollar remained on the front foot heading into the data.
Sterling was quoted at $1.1527 early Thursday, down from $1.1588 at the London equities close on Wednesday.
The euro traded at $0.9964 early Thursday, down from $0.9997 late Wednesday.
‘A fresh serving of US data should keep the market’s expectations hawkish,’ said ING bank. ‘The move in the interest rate differential plays in the dollar’s favour and reduces the room for a recovery in the euro. The market is pricing in a near 75bp hike for next week’s BoE meeting.’
Gold was quoted at $1,686.79 an ounce, lower than $1,705.20 on Wednesday. Brent oil was trading at $93.73 a barrel, down from $95.38 late Wednesday.
In London, there were broad-based gains throughout the FTSE 100 as London stocks staged a rebound.
Banks including NatWest, up 2.2%, and Lloyds, up 1.8%, were higher ahead of the Bank of England’s next interest rate meeting, postponed to Thursday next week. The BoE is expected to raise UK interest rates by 50 basis points.
Shell shares edged up 0.8% after saying Chief Executive Officer Ben van Beurden will step down at the end of 2022. Taking his place from January 1 of next year will be Wael Sawan, currently Shell’s head of integrated gas & renewables.
Slumped at the bottom of the mid-caps was Hilton Food Group, tumbling 26% after warning annual profit will be below expectations, due to cost pressures on consumers, as well as a hit from start-up costs and rising interest rates.
In the 28 weeks to July 17, the food packaging business said pretax profit declined by 9.7% year-on-year to £19.6 million from £21.7 million. Revenue was 20% higher to £2.0 billion from £1.7 billion.
Elsewhere, THG shares fell 16% after cutting guidance. The online beauty products retail platform now expects full-year adjusted earnings before interest, tax, depreciation and amortisation to come in at a range of £100 million to £130 million. Earlier this year, it had been expecting adjusted Ebitda of £161 million, in line with the previous year.
Wickes shares rose 8.1% after reaffirming full-year guidance despite a ‘softening’ of the DIY market. It expects to report full-year adjusted pretax profit in the range of £72 million to £82 million.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 0.2%. In China, the Shanghai Composite ended down 1.2%, while the Hang Seng index in Hong Kong was up 0.2%. The S&P/ASX 200 in Sydney closed up 0.2%.
The rising costs of energy imports combined with a weak yen have brought Japan’s trade balance deep into the red, with the country’s trade deficit in August reaching a record JP¥2.8 trillion, about $19 billion, the Finance Ministry said on Thursday.
The August figures mean that the resource-poor country, despite being the world’s third largest economy, has now been in the red for its trade balance for 13 months in a row.
The data hit the beleaguered Japanese yen. Against the yen, the dollar was quoted at JP¥143.71, up versus JP¥142.70.
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