Stock prices in London were mixed on Wednesday morning, as investors looked ahead to US inflation data and weighed continued geopolitical tensions in the Middle East.
The FTSE 100 index opened down 25.03 points, 0.3%, at 7,658.88. The FTSE 250 was up 12.96 points, 0.1%, at 19,306.98, and the AIM All-Share was up 0.27 of a point at 752.93.
The Cboe UK 100 was down 0.3% at 765.32, the Cboe UK 250 was slightly higher at 16,770.54, and the Cboe Small Companies was up 0.4% at 14,993.59.
In European equities, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was flat.
On Thursday, US inflation figures will be released which will give weight to the debate over the pace of interest rate cuts this year.
According to FXStreet, market consensus forecasts expect the headline consumer price index to edge up to 3.2% annually in December, from 3.1% in November. However, core inflation - which excludes food and energy - is expected to cool to 3.8% from 4.0%.
The dollar was mixed against major currencies in early exchanges in Europe.
Sterling was quoted at $1.2702 early Wednesday, edging down from $1.2703 at the London equities close on Tuesday. The euro traded at $1.0936, higher than $1.0923. Against the yen, the dollar was quoted at JP¥144.90, up versus JP¥144.35.
Casting something of a cloud over equity markets were the latest gloomy predictions from the World Bank.
It forecasts the world economy will expand just 2.4% this year. That would be down from 2.6% growth in 2023, 3% in 2022 and a galloping 6.2% in 2021, which reflected the robust recovery from the pandemic recession of 2020. It pointed to high interest rates, persistent inflation, slumping trade and a diminished China, as well as risks of escalating tensions stemming from Israel’s war with Hamas and the conflict in Ukraine.
UK and US naval forces have ‘repelled the largest attack by the Iranian-backed Houthis in the Red Sea to date’, British Defence Secretary Grant Shapps said on Wednesday.
A British warship destroyed ‘multiple attack drones with her guns and sea viper missiles’, Shapps added, hours after Washington said the two countries’ forces had shot down 18 drones and three missiles on Tuesday.
Investors are also anticipating the latest earnings from US banks, with earnings from Bank of America, Wells Fargo, Citigroup and JPMorgan due on Friday.
‘The impact of the Federal Reserve’s rate hike policy, cautious consumer behaviour, macro uncertainty, and signs of economic contraction in Q4 have raised concerns about the forthcoming fourth-quarter corporate earnings season. High valuations and thoughts of a broader economic slowdown may cast a shadow on corporate earnings, even if profits exceed expectations,’ said SPI Asset Management’s managing partner, Stephen Innes.
Meanwhile, in London, Sainsbury’s was the worst large-cap performer, down 5.2%.
The grocer said it continued to outperform the market over the festive period. In the 16 weeks to January 6, grocery sales rose 9.3% year-on-year, with Christmas grocery sales rising 8.6%.
General Merchandise sales fell 0.6% in the period, but rose 1.5% when excluding the hit from Argos’s closure in Ireland. Total retail sales excluding fuel grew 6.5% over the period as a whole, and 4.9% over the six-week Christmas period.
The grocer reiterated annual guidance for underlying pretax profit between £670 and £700 million for the current financial year to March 2, compared to £690 million in financial 2023.
In a negative read-across, Tesco fell 1.4%, Marks & Spencer shed 1.3%.
In the FTSE 250, investors were more impressed with the update from Greggs, which rose 9.6%.
Greggs reported double-digit sales growth in 2023, with total sales rising 20% to £1.81 billion from £1.51 billion. The bakery chain said company-managed shop like-for-like sales rose 14% over the year, but slowed to 9.4% in the final quarter. It opened a ‘record’ 220 new shops in the year, resulting in net new shop openings of 145, and 2,473 shops trading at the end of 2023.
It continues to expect a full-year outcome in line with its previous expectations.
Pennon Group fell 1.4%, as it revealed its latest acquisition.
The water utility company said it has acquired Sumisho Osaka Gas Water UK Ltd - the holding company for Sutton & East Surrey Water and other ancillary businesses - for £89 million. It acquired the business from Sumitomo Corp and Osaka Gas, with a total enterprise value of £380 million.
‘SES Water is a fantastic fit for Pennon as we further expand our presence in water supply across Southern England, building on our successful similar acquisitions of Bournemouth Water and Bristol Water alongside the adoption of water supply in the Isles of Scilly,’ said Susan Davy, Pennon CEO.
In order to maintain its gearing range of 55-65%, it plans to issue up to £180 million in new shares, at a price to be determined in due course.
Among small-caps, Capita dropped 6.1% as RBC cut the stock to ’sector perform’ from ’outperform’.
On AIM, Marks Electrical dropped 24%, as it warned of pressure on margins despite double-digit sales growth.
The electrical retailer said in the nine months to December 31, revenue rose 22% year-on-year to £88.9 million. However, its gross margin did not see the rise it had expected, due to ‘a challenging trading environment where consumers remain highly price conscious’, despite controlling other costs. The firm warned this will have a knock-on effect on its annual earnings.
In the US on Tuesday, Wall Street ended mostly lower, with the Dow Jones Industrial Average down 0.4%, the S&P 500 down 0.2%, though the Nasdaq Composite edged up 0.1%.
Hewlett Packard Enterprise fell 8.5% after Reuters reported it was in talks to buy Juniper Networks in a deal valuing the network gear maker at about $13 billion, citing a person familiar with the matter.
After the market close, HPE confirmed a $14 billion deal for Juniper, which HPE said will help to accelerate its adoption of artificial intelligence technology.
In Asia on Wednesday, the Nikkei 225 index in Tokyo closed up 2.0%, continuing to add to 33-year highs. In China, the Shanghai Composite closed down 0.5%, while the Hang Seng index in Hong Kong shed 0.6%.
Adding to a backdrop of heightened geopolitical tensions, China vowed it will ‘never compromise’ on Taiwan and told the US to stop providing military aid, days ahead of a crucial election on the self-ruled island.
China claims Taiwan, which holds elections on Saturday, as part of its territory and has vowed to seize it one day. The election is being closely watched – including by policymakers in Beijing and Washington – as its outcome will impact the future of Taiwan’s relations with an increasingly assertive China.
The S&P/ASX 200 in Sydney closed down 0.7%.
Gold was quoted at $2,031.47 an ounce early Wednesday, higher than $2,029.09 on Tuesday.
Brent oil was trading at $77.87 a barrel, edging higher than $77.81.
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