(Alliance News) - London's FTSE 100 was struggling for direction on Wednesday at midday, underperforming European peers, while pressure on the Bank of England intensified after UK inflation hit double figures again.
The FTSE 100 index was down just 1.45 points at 6,935.29. The FTSE 250 was off a heftier 217.21 points, or 1.2%, at 17,312.10. The AIM All-Share shed 6.77 points, 0.9%, at 788.71.
The Cboe UK 100 traded 0.1% lower at 693.16, the Cboe UK 250 fell 1.3% to 14,832.56, and the Cboe Small Companies traded 0.3% lower at 12,421.51.
In European equities on Wednesday afternoon, the CAC 40 in Paris rose 0.3%, and the DAX 40 in Frankfurt added 0.2%.
The pound fell to USD1.1255 midday Wednesday from USD1.1291 late Tuesday, despite another hot consumer price index rise increasing the likelihood of the UK central bank stepping up its pace of rate hikes.
The UK inflation rate picked up to 10.1% in September from 9.9% in August and returned to the same rate as recorded in July. The latest figure came in marginally hotter-than-expected, with a reading of 10% foreseen by the market, according to FXStreet.
The reading is likely to ensure another chunky rate hike by the Bank of England next month, potentially a 75 basis point lift to the bank rate. Last month, the central bank raised the key rate by 50 basis points for the second time in a row.
"With the country's economic prospects looking bleak, a higher-than-expected inflation reading adds to the woes faced by British policymakers," ActivTrades analyst Ricardo Evangelista commented.
Pressure is also on the European Central Bank, which makes an interest rate decision on Thursday next week, as eurozone inflation also remains too high.
However, the eurozone's yearly inflation rate was a touch cooler than expected last month, according to revised figures.
The yearly inflation rate for the single currency area was 9.9% in September, slightly below the 10% initial estimate from Eurostat, though quickening from 9.1% in August.
Highlighting the plight faced by the ECB, a year earlier, the eurozone yearly inflation rate was 3.4%, still above the central bank's 2% target, but markedly below the current rate.
The euro traded at USD0.9779 midday Wednesday UK time, down from USD0.9826 at the time of European equities close on Tuesday.
The dollar rose to JPY149.57 from JPY149.24 late Tuesday.
In London, Asos shares rose 11%. The online clothing retailer reported a swing to annual loss, though it outlined plans to revive its fortunes after performing a "diagnostic" on its issues.
Revenue in the financial year that ended August 31 rose 0.7% to GBP3.94 billion from GBP3.91 billion a year earlier. However, Asos reported a swing to an annual pretax loss of GBP31.9 million of GBP177.1 million.
Among its issues, Asos said, is an underperforming international arm, its supply chain operations, its "customer acquisition and commercial model", and the need for data and digital improvements.
Over the next 12 months, it will look to improve inventory management, reduce its costs and "reinforce" its leadership team and culture.
Asos expects a GBP100 million to GBP130 million non-cash stock write-off for the new financial year. Capital expenditure, at GBP175 million to GBP200 million, will be below the mid-term range of GBP200 million to GBP250 million.
It also flagged a half-year loss for the current financial year.
On AIM, IOG plunged 52%. The North Sea-focused gas and infrastructure operator has suspended its Southwark A1 well due to more fluid losses, putting its focus elsewhere as it still eyes first gas this quarter.
"Drilling the Southwark A1 well has continued to be very challenging, with further fluid losses at the base of the Bunter Shale. To preserve the opportunity to deliver first gas in this quarter, we have decided to suspend operations on A1 in order to ensure that A2 stimulation work proceeds in the scheduled window," Chief Executive Andrew Hockey says.
Analysts at SP Angel commented: "Lower reserves, lower production, higher costs and delays; a sobering update from IOG on its operational difficulties and below-expectation reservoir performance.
"Shareholders will hope that this 'kitchen-sinking' marks the low point of the start-up issues that have plagued the project and that management can find long-term solutions to optimise reservoir management and resolve its drilling issues.
7digital surged 41% as it announced a contract win with Pinterest, a social media platform famed for its moodboards and image sharing.
"7digital's three-year contract with Pinterest is designed to support growth in content and territories as the platform expands into new markets as needed. The contract will enable Pinterest's music library to include licensed commercial tracks, delivered by 7digital's music-as-a-service platform, to sit alongside their royalty free music," the music licensing provider said.
Lloyds Banking fell by 3.3%, NatWest by 1.6% and Barclays by 1.3%.
The shares fell in response to a report that banks will be targeted by the new UK chancellor, Jeremy Hunt.
According to the Financial Times, Hunt will look at a tax on banking sector profits, in a bid to bolster the government's finances.
Banks currently pay an effective 27% tax rate, stemming from corporation tax at 19% and the banking surcharge at 8%.
While corporation tax is to climb to 25% in April, the FT reported that Hunt is undecided on whether to keep the bank surcharge at the current 8%. The surcharge had been due to drop to 3% next year under plans announced last year.
The FT quoted a treasury spokesperson as saying: "We can't comment on specific speculation; however, the chancellor and prime minister have been clear that difficult decisions will be required to restore economic stability and no options are off the table."
A barrel of Brent oil rose to USD91.07 around midday in London, up from USD88.97 late Tuesday. Brent fell below USD89 before regaining poise on Wednesday morning.
President Joe Biden will announce on Wednesday that he is putting the final 15 million barrels on the market from a record release of US strategic oil reserves, with more releases possible if energy prices spike, a senior US official said.
The new tranche of oil from the Strategic Petroleum Reserve will be "completing the 180 million barrel release authorized in the spring", in response to price hikes linked to Russia's invasion of Ukraine, the senior US official added.
In New York, focus remains on corporate earnings, with Tesla reporting later on Wednesday, with AT&T, American Airlines and American Express to follow before the end of the week.
Stocks in New York were called to open higher on Wednesday. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 up 0.3% and the Nasdaq Composite up 0.5%.
"Third-quarter earnings season from the US may help to set the mood and so far, companies seem to be performing well, albeit against some pretty modest expectations," AJ Bell analyst Russ Mould commented.
"For now, corporate America seems to be standing up well to the inflation storm, but a lot will depend on the big tech companies reporting next week – with the destiny of the markets in the hands of the likes of Apple, Alphabet and Amazon."
Gold traded at USD1,633.90 an ounce midday Wednesday, down from USD1,647.70 at the London equities close Tuesday.
Still to come in Wednesday's economic calendar are US housing starts at 1330 BST.
By Eric Cunha; ericcunha@alliancenews.com
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