European shares were trading lower heading into the start of US trading on Wednesday, as investors became resigned to yet another round of central bank rate hikes come May.
Share price declines for London-listed miners, returning gains they achieved after a better-than-expected reading of the Chinese economy on Tuesday, also hurt the FTSE 100 index, which was underperforming large-cap peers in continental Europe.
The FTSE 100 traded down 30.77 points, 0.4%, at 7,878.67 midday Wednesday. The FTSE 250 was down 155.77 points, 0.8%, at 19,140.55, and the AIM All-Share was down 3.98 points, 0.5%, at 828.46.
The Cboe UK 100 was down 0.4% at 788.35, the Cboe UK 250 down 0.9% to 16,764.36, and the Cboe Small Companies down 0.1% to 13,229.92.
On European stock exchanges, the picture was less bleak, though still negative, with traders mindful of the path of US interest rates. The CAC 40 index in Paris was down 0.1%, while the DAX 40 in Frankfurt was down 0.3%.
On Tuesday, St Louis Federal Reserve President James Bullard said more interest rate hikes may be necessary to tame inflation.
Bullard’s speech echoed Fed Governor Christopher Waller, who said on Friday further tightening was needed. Recently, Atlanta Fed President Raphael Bostic also endorsed a 25 basis point hike early next month. The Fed will begin its next policy-setting meeting on May 2, with a decision and press conference from Chair Jerome Powell a day later.
The Bank of England next decides on interest rates about a week later, on May 11. Threadneedle Street was in focus again after a reading showed UK inflation is proving stickier than expected.
While the rate of yearly inflation tamed to 10.1% last month from 10.4% in February, it was above FXStreet-cited market consensus of 10%.
Analysts at Rabobank commented: ‘The market is now priced for 28 basis points of hikes at the BoE’s upcoming meeting and a terminal base rate of 5.00% (this compares to 21bp and 4.77% at close of business last Friday).’
Over in the eurozone, inflation remains robust but comfortably below the 10% mark. The annual harmonised inflation rate across the single currency was confirmed to have cooled to 6.9% in March from 8.5% in February.
Sterling was quoted at $1.2429 early Wednesday afternoon, firm on $1.2424 at the London equities close on Tuesday. The euro bought $1.0938, down from $1.0964. Against the yen, the dollar was trading at JP¥134.81, up versus JP¥133.96.
The beefy UK inflation reading hurt London-listed consumer stocks. Athleisure retailer JD Sports fell 1.7%, while fast-fashion seller boohoo slid 4.7%.
Pots and pans merchant ProCook was down 9.7%. In the fourth quarter ended April 2, revenue declined 9.7% on-year to £12.6 million, the company said on Wednesday. Revenue for the whole of its financial year was 9.9% lower at £62.3 million.
‘The last year has been very difficult for consumers as real disposable incomes have fallen, which is reflected in our softer sales performance against our significant growth and market outperformance last year,’ Chief Executive Officer Daniel O’Neill said.
Among London-listed large-caps, miners traded lower. Anglo American lost 2.6% and Rio Tinto 1.4%, returning some gains from Tuesday. Anglo had risen 3.3%, while Rio added 1.0%, on the back of report of better-than-expected Chinese economic growth.
Gold miner Fresnillo lost 4.0%, tracking bullion prices lower. Gold was quoted at $1,973.732 an ounce early Wednesday afternoon in London, down markedly from $2,010.02 late on Tuesday.
National Express shares were up 4.8%. The public transport provider said its first-quarter went in line with expectations and it launched a cost reduction programme. It said revenue in the first quarter of 2023 rose 25% year-on-year to £774.4 million.
National Express said it is targeting at least £25 million in annualised savings under the productivity improvement and cost-reduction programme. It expects to see the first beneficial impact of those actions delivered in the second half of 2023.
Car dealer Pendragon jumped 13% after it reported ‘very strong’ first quarter performance across all divisions over the first three months of 2023.
Underlying pretax profit was up 23% year-on-year to £23.0 million. It now expects to ‘comfortably outperform’ the board’s previous expectations for its full year.
Struggling lender Amigo Holdings plunged 35% after the company said it knows no reason for a recent share price jump. The stock had more than trebled on Tuesday to close at 0.95 pence from 0.28p.
Amigo is currently navigating a wind-down of the company, ‘which is expected to result in no value attributable to shareholders’. The company provided guarantor loans but is no longer lending.
Brent oil was trading at $83.21 a barrel midday Wednesday, down from $84.56 late Tuesday afternoon.
Stocks in New York were called to open lower, with another slate of corporate earnings to come. The Dow Jones Industrial Average was pointed down 0.4%, the S&P 500 index down 0.5%, and the Nasdaq Composite down 0.8%.
Electric carmaker Tesla and computing company IBM report first-quarter results on Wednesday.
Netflix shares traded 0.8% lower in pre-market activity in New York. After the market close on Tuesday, it said net income in the first quarter of 2023 fell 18% year-on-year to $1.31 billion. Revenue increased 3.7% to $8.16 billion from $7.87 billion.
The streaming service added 1.75 million subscribers, falling short of a loftier Wall Street estimate of a 2.06 million additions.
‘One of Netflix’s problems is a lack of consistent hits that become the ’water cooler’ discussion point in the office, at home or in the pub,’ AJ Bell analyst Russ Mould commented.
‘Wednesday was a smash hit in the final quarter of 2022 and The Night Agent was the standout show in terms of popularity in the first quarter of 2023. But the problem lies in the ability to binge these shows - you can clear them in a day or two, meaning the rest of the time is spent yearning for something new to watch.’
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