Stocks in London closed in the red on Tuesday despite an upbeat morning session, as investors wiped out earlier gains following selling pressure in the US.
The FTSE 100 index closed down 65.68 points, or 0.9%, at 7,361.63 on Tuesday. The mid-cap FTSE 250 index ended down 20.07 points, or 0.1%, at 19,149.65. The AIM All-Share index closed down 9.47 points, or 1.1%, at 887.31.
The Cboe UK 100 index closed up 0.9% at 734.73. The Cboe 250 closed flat at 16,441.83 and the Cboe Small Companies closed down 0.6% at 14,039.06.
In mainland Europe, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was up 0.5% on Tuesday.
The picture was not any brighter in the US. Stocks in New York were in the red at the London equities close, with the Dow Jones Industrial Average down 0.8%, the S&P 500 index down 1.0%, and the Nasdaq Composite was down 1.2%.
AJ Bell Investment Director Russ Mould added: ‘The US Federal Reserve has spent more than a decade trying to fuel inflation with the blunt instruments of interest rates and Quantitative Easing and now it has (over)done it, the central bank seems determined to use the same tools to choke inflation, almost regardless of the damage done elsewhere.
On Friday, US Federal Reserve Chair Jerome Powell he left no room for doubt about the US central bank's stance on tightening, pledging to act ’forcefully.‘
He warned the world's largest economy is likely to slow for a sustained period, and the strong US job market will suffer in order to get prices down - which he called the ’unfortunate costs of reducing inflation.‘
‘Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance,’ he told the gathering of central bankers on Friday.
‘Fed chair Jay Powell seems to be focusing on inflation alone, and jettisoning prior concerns about unemployment and financial market volatility, so it is no wonder investors are getting jittery.’
In London, Bunzl shed 6.1%. This was despite the distribution firm reporting that pretax profit in the six months to June 30 grew 7.6% to £296.6 million from £275.7 million.
Inflation was ‘somewhat supportive’ to margins, Bunzl said, though the reduction of Covid-19 sales meant they still narrowed to 7.3% from 7.5%. Still, Bunzl now expects its full-year operating margin to be higher than historical levels and only slightly below 2021.
Dechra Pharmaceuticals advanced 2.7%.
It acquired California-based veterinary pharmaceutical manufacturer Med-Pharmex for $260.0 million. Med-Pharmex has been a ‘long-term acquisition target’, it said, and will bolster Dechra's operations in the US.
Pub groups Marston's and Wetherspoons had a rough session, closing down 1.7% and 0.2% but recovered from being down 1.1%, after six of the UK's biggest pub and brewing firms said some pubs had seen a more than 300% hike in bills this year, as part of a wider cost of living crisis.
The brewers - Greene King, JW Lees, Carlsberg Marston's, Admiral Taverns, Drake & Morgan and St Austell Brewery - urged the government in an open letter to extend the cap to businesses.
The British Beer & Pub Association, an industry body, said energy price rises, caused by hikes in wholesale costs and a squeeze on supplies due to the war in Ukraine, could damage the sector more than the pandemic if nothing is done.
On AIM, Diurnal Group shares more than doubled after it agreed to a £48.3 million takeover from US biopharmaceutical firm Neurocrine Biosciences.
Under the cash acquisition, Diurnal shareholders will be entitled to receive 27.5 pence for each Diurnal share. This is more than double the 11.25p Diurnal closing price on Friday. The stock was quoted at 26.25p at the close on Tuesday.
The takeover is conditional on the approval of Diurnal shareholders. Diurnal directors consider the terms ‘fair and reasonable’ and have unanimously recommended the offer.
Sterling was quoted at $1.1662 on Tuesday evening, lower than $1.1764 at the London equities close on Friday. The pound was on the back foot on Tuesday.
The euro traded at $1.0022, up against $0.9997 late Friday. Against the yen, the dollar was quoted at JP¥138.75, up from JP¥137.31.
Gold was quoted at $1,725.60 an ounce, lower than $1,736.54 on Friday. Brent oil was trading at $99.99 a barrel, up from $99.59 late Friday but some way off a morning high above $105 a barrel.
The international economic calendar on Wednesday has UK BRC shop price index and Japanese industrial production overnight, followed by China's manufacturing PMI. In the morning, there is German import prices and unemployment alongside France inflation data. At 1000 BST, there is eurozone inflation figures, then at 1315 BST there is US ADP employment data.
The local corporate calendar has interim results from Bank of Cyprus, BBGI Global Infrastructure, Irish hotel operator Dalata Hotel Group and insurance company Chesnara.
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