Stock prices in London opened in the red on Wednesday, as oil output cuts by Saudi Arabia and Russia renewed fears of inflationary pressures and interest rate increases.
The FTSE 100 index opened down 63.01 points, 0.9%, at 7,374.92. The FTSE 250 was down 103.48 points, 0.6%, at 18,387.94 and the AIM All-Share was down 1.29 points, 0.2%, at 738.76.
The Cboe UK 100 was down 0.8% at 734.26, the Cboe UK 250 was down 0.6% at 16,052.05, and the Cboe Small Companies was marginally lower at 13,428.81.
In European equities, the CAC 40 in Paris was down 0.8%, while the DAX 40 in Frankfurt was down 0.3%.
The recent climb in oil prices is at the forefront of investors’ minds.
On Tuesday, the Saudi Arabian energy ministry said the kingdom’s production cut of one million barrels per day which first took effect in July will continue ‘for another three months until the end of December 2023’. Russia’s export cut of 300,000 barrels per day will continue for the same period, Deputy Prime Minister Alexander Novak said in a separate statement.
Brent oil was trading at $89.61 a barrel early Wednesday, slightly lower than $90.31 late Tuesday, but still elevated from its recent levels.
Further, there is also the potential for further fluctuation in natural gas prices. Workers at two major Chevron liquefied natural gas facilities in Australia have declared their intention to strike for a two-week period amid an ongoing dispute about pay and working conditions.
The Offshore Alliance union, representing employees at the Gorgon and Wheatstone LNG projects in Western Australia, disclosed that the strike will commence on September 14.
The dispute between the workers and Chevron has been intensifying, with both parties struggling to find common ground in their negotiations.
The dollar had gained ground on Tuesday, but returned some of its gains on Wednesday morning. Traders are considering the possibility that renewed inflationary pressures from the energy market could lead to a greater likelihood of further interest hikes from central banks across the world. It could also help to keep interest rates higher for longer.
The euro traded at $1.0739 early Wednesday, higher than $1.0713 late Tuesday. Against the yen, the dollar was quoted at JP¥147.34, down versus JP¥147.66.
Sterling was quoted at $1.2577, up from $1.2564, but remained lower than in recent weeks.
However, with the recent weak economic data from the UK, the market has somewhat pared back its expectations for how far the Bank of England will take rates.
The prospect of a lower peak for UK interest rates is a much-needed piece of good news for London-listed housebuilders, who have struggled with damped customer demand amid a volatile mortgage market.
The latest update came from Barratt Developments, which reported bottom-line progress in its recently concluded financial year, despite lower completions.
In the year to June 30, pretax profit rose 9.8% to £705.1 million from £642.3 million a year before, as revenue edged up just 1.0% to £5.32 billion from £5.27 billion. Completions fell 3.9% to 17,206 from 17,908, which the firm said reflected the market slowdown experienced from September 2022.
On an adjusted basis, pretax profit fell 16% to £88.43 million as adjusted operating margin fell to 16.2% from 20.0%.
It proposed a final dividend of 23.5 pence per share, bringing the annual total to 33.7p, behind the previous year’s payout of 36.9p. It said there would be ‘no further share buybacks at this stage’.
Barratt shares were down 1.8% with Persimmon down 2.0%, among the worst performers in the FTSE 100.
Persimmon will leave the FTSE 100 on September 18, as founding member Marks & Spencer returns to the large-cap index.
Meanwhile, in the midcap index, Bridgepoint was up 2.0%.
Bridgepoint said it has added Energy Capital Partners to its platform, in a cash and shares acquisition worth £835 million. ‘ECP is a market leader in value-add infrastructure specialising in energy transition and sustainability-focused investing,’ the private equity investor said.
Following the acquisition, which is subject to shareholder approval, it plans to split the roles of CEO and chair. William Jackson will be chair and continue to focus on the core private equity business. Meanwhile, managing partner Raoul Hughe, an ‘architect of both ECP and Bridgepoint Credit transactions’, will become CEO from October 1. Hughes will lead the business on a day-to-day basis, and join the ECP board.
Further, Bridgepoint announced plans for a new £50 million share buyback. It has currently repurchased £43 million of its existing £50 million programme.
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.6%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.1%.
In Asia on Wednesday, the Nikkei 225 index in Tokyo closed up 0.6%. In China, the Shanghai Composite added 0.2%, while the Hang Seng index in Hong Kong was up 0.1% in late dealings. The S&P/ASX 200 closed down 0.8%.
Gold was quoted at $1,925.80 an ounce, little changed from $1,926.63.
The economic calendar has a UK construction PMI print at 0930 BST, EU retail sales at 1000 BST and two services PMI readings for the US from 1445 BST. There will also be an interest rate decision from the Bank of Canada.
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