The mid-cap FTSE 250 index was underperforming its blue-chip counterpart at midday on Thursday, due to a heavy drag from food packaging business Hilton Food Group, with shares plunging nearly 30% on a profit warning.
Investor focus was turning to the latest US economic data point - with retail sales due at 1330 BST - ahead of an interest rate decision next week.
The FTSE 100 index was up 21.63 points, or 0.3%, at 7,298.93 midday Thursday. The mid-cap FTSE 250 index was up 31.30 points, or 0.2%, at 18,880.50. The AIM All-Share index was up 0.26 of a point at 868.60.
The Cboe UK 100 index was up 0.3% at 729.01. The Cboe 250 was down 0.1% at 16,256.12, and the Cboe Small Companies flat at 13,624.52.
In mainland Europe, the CAC 40 in Paris was down 0.5%, while the DAX 40 in Frankfurt was down 0.1%.
European markets were enjoying some respite early Thursday after sentiment tanked following a higher-than-expected US inflation reading earlier this week. But the rebound was uneasy, with gains pared as the session progressed.
‘Most benchmarks aren't registering strong and significant bullish correction following last Tuesday's sell-off, but continue to trade sideways in a volatile manner, which highlights the 'wait and see' situation ahead of today's new batch of US data, tomorrow's EU CPI report, and next week's Fed decision on rates,’ said Pierre Veyret, technical analyst at ActivTrades.
US retail sales for August are due out at 1330 BST, and traders will be looking to see how consumers are holding up in the face of growing inflationary pressures.
US retail sales are expected to have registered no growth last month from the month before, just as there had been no growth in July from June.
Market pricing for the Federal Reserve's policy meeting next week has shifted following Tuesday's hot inflation data, with nearly a quarter of analysts seeing the risk of a full percentage point interest rate hike. A week ago, there were zero odds of such a move.
However, the majority of market participants still think the Fed will carry out another 75 basis point hike.
Ahead of the retail sales figures, Wall Street was pointed to a higher start. The Dow Jones Industrial Average was called up 0.2%, as was the S&P 500 index, while the Nasdaq Composite was indicated up 0.1%.
The dollar was stronger heading into the data.
Sterling was quoted at $1.1502 midday Thursday, down from $1.1588 at the London equities close on Wednesday. The euro traded at $0.9985, down from $0.9997 late Wednesday.
Against the yen, the dollar was quoted at JP¥143.47, up versus JP¥142.70. Data showed 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.
Gold was quoted at $1,689.57 an ounce, lower than $1,705.20 on Wednesday. Brent oil was trading at $93.51 a barrel, down from $95.38 late Wednesday.
In London, Rolls-Royce was the top performer in the FTSE 100, up 5.2%, after completing the €1.8 billion sale of ITP Aero.
The jet engine maker said it will use the proceeds to reduce its debt, with the immediate repayment of its £2 billion loan. The company also noted that the sale of ITP Aero completes its disposal programme, which was announced in August 2020.
Shares in Ocado were rebounding after a brutal few sessions. The stock was up 3.2% at midday, but has still shed 15% over the course of this week.
The worst performer in the FTSE 100 was Melrose Industries, down 3.1% as the stock went ex-dividend, meaning new buyers no longer qualify for the latest payout.
Stuck at the bottom of the FTSE 250 was Hilton Food Group, slumped 27%. The food packaging business said it expects annual profit to be below expectations amid cost pressures on consumers.
In the 28 weeks to July 17, the Cambridgeshire, England-based firm said pretax profit declined by 9.7% year-on-year to £19.6 million from £21.7 million a year earlier. Hilton Food's operating margin weakened to 2.0% from 2.3% due to raw material price inflation.
The FTSE 250-listed company also cut its interim dividend by 13%.
Elsewhere, shares in THG dropped 18% after cutting full-year earnings 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.
There was also a warning from sofa seller DFS Furniture. The firm reported a disappointing annual performance, in a year plagued with operational challenges.
In the 52 weeks to June 26, the Doncaster, South Yorkshire-based soft furnishings retailer said revenue grew 8.5% to £1.15 billion from £1.06 billion a year before. However, pretax profit all but halved to £58.5 million from £102.6 million.
Looking ahead, DFS said the environment remains challenging, with orders softening in the final quarter of the financial year into the first quarter of the next, as the cost-of-living crisis hit consumer sentiment.
DFS shares were down 5.7%.
Fellow retailer Wickes rose 8.0% after reaffirming its own guidance. It expects to report full-year adjusted pretax profit in the range of £72 million to £82 million despite a ‘softening’ of the DIY market.
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