Share prices were mostly lower on Tuesday ahead of the New York open, as continued military tensions in the waters around Taiwan and a key US data point looming on Wednesday was keeping risk appetite in check.
The FTSE 100 was up just 0.10 point at 7,482.47 midday Tuesday. The FTSE 250 index was down 109.10 points, or 0.5%, at 20,009.34. The AIM All-Share index was down 2.37 points, 0.3%, at 917.54.
The Cboe UK 100 index was down 0.1% at 746.50. The Cboe 250 was down 0.5% at 17,354.33. The Cboe Small Companies was up 2.1% at 14,265.07, the small-cap measure getting a boost from a takeover offer for professional services firm RPS Group.
In Paris, the CAC 40 stock index was down 0.4%, while in Frankfurt, the DAX 40 was 0.9% lower.
‘Inflation, geopolitical tensions, monetary policies; a lot of this year's uncertainty may have already been priced in, but bullish market drivers are still hard to find and there is a high chance there are not enough of them to justify an extended short- to mid-term extended rally or a trend reversal,’ ActivTrades analyst Pierre Veyret commented.
Taiwan held an artillery drill on Tuesday, simulating defence against an attack, as its top diplomat accused Beijing of preparing to invade the island. It came after China launched its largest-ever air and sea exercises around Taiwan last week in a furious response to a visit by US House Speaker Nancy Pelosi, the highest-ranking American official to visit the self-ruled island in decades.
‘China has used the drills and its military playbook to prepare for the invasion of Taiwan,’ Taiwanese diplomat Joseph Wu told a press conference in Taipei on Tuesday, accusing Beijing of using Pelosi's visit as a pretext for military action.
Markets also were looking ahead to Wednesday's US consumer price index. The release comes after the US Federal Reserve enacted successive three-quarter percentage point rate hikes and after Friday's nonfarm payrolls report showed an unexpectedly strong jobs market.
A similarly hot inflation reading will strengthen the case for another chunky rate hike by the Fed.
While the inflation rate is forecast to ebb to 8.7% in July from 9.1% in June, the last couple of CPI readings have come in ahead of expectations, adding to the nerves ahead of Wednesday's data, AJ Bell analyst Danni Hewson commented.
‘The fact economists are already predicting a slowdown in the rate of inflation means markets could be in for a shock if the inflation figure does not fall to the expected level,’ Hewson said.
The dollar was mixed on Tuesday. The pound was quoted at $1.2107, slipping from $1.2114 at the London equities close Monday. The euro was priced at $1.0232, up from $1.0217. Against the yen, the dollar was trading at JP¥134.92, up from JP¥134.61.
‘The lack of follow-through for the dollar is disappointing,’ commented Brown Brothers Harriman.
‘Last week was an eventful one, one filled with hawkish Fed comments that were backed up by strong US data. Yet the dollar's bounce has already run out of steam. For now, we are maintaining our strong dollar call and are chalking up recent price action to the start of the summer doldrums. Tomorrow's CPI data could shake things up, but we don't see much risk of the readings impacting Fed policy.’
In London, abrdn shares were 4.6% lower at midday. The asset manager reported a swing to loss and a warning that current market volatility will see it take longer to hit its revenue growth and cost-to-income ratio targets.
abrdn's Investment unit ended the first half with assets under administration of £386 billion, sinking 17% from £464 billion at the same point a year prior. It recorded £37.3 billion in net outflows.
abrdn booked a £320 million loss in the six months to June 30 versus the £113 million profit achieved a year prior. Fee-based revenue fell 8% to £696 million from £755 million, and its cost-to-income ratio worsened to 83% from 79%.
IWG tumbled 10%. In the six months to June 30, IWG's pretax loss narrowed to £81.3 million from £173.0 million a year prior, as system-wide revenue rose 22% to £1.45 billion from £1.17 billion.
The flexible workspace provider said its industry is facing ‘many tailwinds’ as companies seek out hybrid working conditions more and more.
IWG decided against a dividend, explaining it would keep payouts on hold due to the current macroeconomic climate and geopolitical tensions.
Elsewhere in London, RPS was a standout performer, jumping 74% after agreeing to a £591.1 million cash takeover by Toronto-listed consultancy firm WSP Global. WSP will pay 206 pence per RPS share.
RPS shares traded at 204.00p at midday, giving it a market capitalisation of £566.1 million.
WSP provides engineering consulting services in the energy, maritime, infrastructure and rail and transport spaces. RPS works in fields including health and safety, exploration and development, planning and approvals and communications.
Shares in Independent Investment Trust also got a lift from M&A action, adding 14%. It agreed terms for a combination with FTSE 250-listed Monks Investment Trust.
Under the proposed combination, Independent Investment Trust shareholders will be offered a rollover option to receive new shares in Monks, or a cash option to realise part, if not all, of their holdings in the trust for cash.
Monks shares were down 2.0%.
Equities in New York are called mostly lower on Tuesday. The Nasdaq Composite was indicated down 0.5%, the S&P 500 down 0.2% and the Dow Jones Industrial Average flat, according to index futures trading.
Nvidia shares will be in focus once again, with the stock down 3.2% in pre-market trade, having already given back 6.3% on Monday.
For the three months to July 31, the Santa Clara, California-based semiconductor maker said on Monday it expects to report revenue of about $6.70 billion, which is 17% behind the previous guidance of $8.10 billion.
‘The shortfall relative to the May revenue outlook of $8.10 billion was primarily attributable to lower sell-in of Gaming products reflecting a reduction in channel partner sales likely due to macroeconomic headwinds,’ Nvidia said.
Brent oil was quoted at $97.62 a barrel midday Tuesday in London, down from $96.22 late Monday. Shares in BP and Shell rose 1.1% and 1.0%, helping to shield London's FTSE 100 from a steeper decline on Tuesday.
Gold stood at $1,792.30 an ounce midday Tuesday, up against $1,789.50 late Monday.
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