Blue-chip shares in Europe were on the up on Wednesday afternoon, as attention turns to a US inflation reading, and what it would mean for monetary policy.
Ahead of the reading, the dollar gained on the pound, boosting shares in the FTSE 100’s international earners.
Among individual shares in London, AIM-listed System1 soared as it forecast a return to profit. De La Rue slumped as the banknote printer warned profit will fall short of expectations.
The FTSE 100 index was up 47.69 points, or 0.6%, at 7,833.41. The FTSE 250 was up 17.06 points, or 0.1%, at 18,973.11, and the AIM All-Share was flat at 816.85.
The Cboe UK 100 was up 0.6% at 783.48, the Cboe UK 250 was flat at 16,537.55, and the Cboe Small Companies was up 0.6% at 13,661.40.
In European equities on Wednesday, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.3%.
‘There is one key thing dominating the agenda today - US inflation figures,’ commented Russ Mould, investment director at AJ Bell.
‘The rate of inflation in the US has been easing back since October 2022, providing some relief to consumers and businesses. However, if the rate comes in higher than expected at today’s reading, then markets could easily throw their toys out of the pram. It would also stir the pot that the [US Federal Reserve] might need to stay on its current path with rate rises.’
The US inflation data for March will be released at 1330 BST. Markets are expecting the annual inflation rate to cool to 5.2% from 6.0%, according to FXStreet.
Core inflation - excluding food and energy - is expected to edge up to 5.6% annually from 5.5% in February.
While the next Federal Reserve meeting is in May, the data could still prove important. A hotter-than-expected reading strengthens the case for the Fed to continue hiking, though a cooler print may mean a policy pivot is in the offing.
At its last meeting in March, the Fed lifted interest rates by 25 basis points, resisting the urge to pause hikes in the face of banking sector turmoil.
The Federal Open Market Committee’s March meeting minutes will be published at 1900 BST.
The minutes may help shed light on how the FOMC viewed the fallout from the collapse of Silicon Valley Bank last month, as well as the subsequent banking sector turmoil.
Stocks in New York were called slightly higher. The Dow Jones Industrial Average was called up 0.3%, the S&P 500 index up 0.2%, and the Nasdaq Composite up 0.1%.
The dollar was largely stronger as investors kept one eye on the incoming US inflation figures and the release of the FOMC minutes.
The pound was quoted at $1.2418 at midday on Wednesday in London, lower compared to $1.2427 at the close on Tuesday. Meanwhile, the euro stood at $1.0926, higher against $1.0914.
Against the yen, the dollar was trading at JP¥133.64, slightly higher compared to JP¥133.61.
A weaker US inflation reading could put some pressure on the dollar, however, as investors would dial back their hawkish Federal Reserve bets.
In London, Centrica, DCC and BT Group were the best blue-chip performers at midday. The stocks were up 2.0%, 1.7%, and 1.7%, respectively, supporting the FTSE 100.
Unite Group was also on the up, climbing 1.0%, as it reported significantly higher reservations for UK student accommodation, citing strong demand from existing and new students.
The student accommodation developer noted ‘strong progress’ in booking, with 90% of rooms already sold in the 2023/24 academic year, up from 78% a year ago.
In the FTSE 250, Tullow Oil dropped 5.4% after Jefferies cut the oil producer to ’underperform’ from ’hold’, with a reduced price target of 25 pence. The stock is currently trading at 30.60p.
Elsewhere in London, Treatt added 5.9% after it said it expects revenue to increase to £75.9 million for the six months ended on March 31. This would represent growth of 15% from £66.3 million the year before.
Chief Executive Officer Deammon Reeve said: ‘We’ve had a strong half with record sales performance, particularly driven by our largest category, citrus, where we have both strengthened our longstanding relationships with some of the biggest beverage companies whilst also winning some new customers.’
The extract and ingredient manufacturer also said it has started financial 2023 strongly, with second quarter momentum ‘particularly encouraging’.
De La Rue plunged 25% after it announced it has been hurt by demand for banknotes sinking to a more than 20-year low.
The security printed products maker said it expects adjusted operating profit for the year ended March 25 to be ‘a mid-single digit percentage below market expectations’. In financial 2022, adjusted operating profit was £36.4 million.
Nonetheless, De La Rue said it is seeing signs of recovery, with a ‘significant number of new tenders actively underway’, though it added that the pace of a bounce back is uncertain.
On AIM, System1 soared 17% as it announced that it expects to return to profit in the second half, and year as a whole, on an adjusted and statutory basis, thanks to an improved revenue performance in the second half.
The marketing and brand consultancy expects profit for the year to March 31 will now ‘slightly’ exceed its previous expectations. In its half year to September 30, it posted a pretax loss of £6,000, swung from pretax profit of £1.3 million a year before.
Brent oil was quoted at $85.74 a barrel at midday in London on Wednesday, up from $85.22 late Tuesday. Gold was quoted at $2,008.76 an ounce, higher against $2,002.83.
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