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(Alliance News) - European markets got off to a lacklustre start on Tuesday, as concern about bigger-than-expected interest rate hikes from the US Federal Reserve resurfaced.
The FTSE 100 index opened down 6.11 points, 0.1%, at 7,561.43. The FTSE 250 was down 71.36 points, 0.4%, at 19,258.22, and the AIM All-Share was down 4.29 points, 0.5%, at 846.43.
The Cboe UK 100 was down 0.2% at 756.25, the Cboe UK 250 was down 0.5% at 16,648.44, and the Cboe Small Companies was marginally lower at 13,089.14.
In European equities on Tuesday, the CAC 40 index in Paris was down 0.4%, while the DAX 40 in Frankfurt was down 0.4%.
"Worries that the Fed could unwrap an unwelcome present of another super-sized rate hike when policymakers meet next week are sprinkling Christmas fear on indices," said Hargreaves Lansdown's Susannah Streeter.
The fear was prompted by a strong US service sector print from the Institute for Supply Management on Monday.
The ISM services index rose to 56.5% last month, well above the 50% threshold indicating growth and defying expectations that activity would slow as US consumers draw down their savings. In contrast, the similar S&P Global US services PMI painted a bleaker picture, fading to 46.2 points in November from 47.8 in October and indicating continued contraction.
"Companies still appear to be dealing with pent-up demand with the ISM reading showing the services sector is expanding merrily. With central bank policies so far having meagre impact on the jobs market, the chances of a 0.75% rate hike being announced on the 14th are now considered to be higher," Streeter added.
Previously, following recent remarks by US Fed Chair Jerome Powell, the market had been starting to count on a 0.50% hike.
Sterling was quoted at USD1.2190, flat from USD1.2189 at the London equities closer on Monday. The euro traded at USD1.0483, lower than USD1.0515. Against the yen, the dollar was quoted at JPY136.91, up versus JPY136.42.
UK grocery price inflation eased slightly, according to new figures from Kantar. It edged down to 14.6% in November from 14.7% in October, the first slowdown price rises in 21 months.
"Although this was the first decline in grocery inflation in almost two years, it was only a very modest drop with food still outpacing broader price increases in the economy. As a result, the increased cost of essential items like groceries mean that inflation is unfairly weighing most heavily on those at the lower end of the income spectrum," commented interactive investor's Victoria Scholar
German discount supermarkets were seeing strong year-on-year growth in total till roll consumer spend. In the 12 weeks to November 27, consumer spend was up by 24% for Aldi and 22% for Lidl, compared to the previous year. Tesco and Sainsbury saw 3.9% and 4.3% growth in sales respectively, while their market share remained steady.
"December looks set to be a record-breaking month with sales going above the GBP12 billion mark for the first time," McKevitt added.
Tesco and Sainsbury shares both were down 0.2%.
Among other FTSE 100 stocks, Ashtead added 3.1%, as it reported strong revenue and profit growth in its second quarter.
In the three months to October 31, the industrial equipment rental company said revenue grew by 28% to USD2.54 billion from USD2.03 billion a year before. Pretax profit jumped 40% to USD658 million from USD474 million.
In the first half as a whole, revenue rose 26% to USD4.80 billion and pretax profit grew by 35% to USD1.19 billion. Ashtead now expects annual results ahead of its previous guidance.
"The British industrial equipment rental company appears to be handling the challenges of inflation and rising interest rates, given the upgrade to its full-year outlook. This is typically a cyclical business that is subject to the ups and downs of the macroeconomy with the rising risk of recession likely to be a headwind for Ashtead in 2023," noted ii's Scholar.
Ashtead raised its interim dividend by 20% to 15 cents per share.
Phoenix Group rose 1.0%.
The insurer said it expects to deliver around GBP1.2 billion in incremental new business long-term cash generation in 2022, mostly via its Standard Life branded businesses. Phoenix said it also remains on track to deliver cash generation at the top end of its target range of GBP1.3 billion to GBP1.4 billion in 2022.
"It is shaping up to be another outstanding year for Phoenix Group," said CEO Andy Briggs.
At the other end of the large-cap index was Mondi, down 4.1%. The packaging company's stock was cut to 'underperform' by Credit Suisse.
Utility stocks Pennon, United Utilities and Severn Trent were also lower, down 3.0%, 2.1% and 2.0%, respectively. They were placed on 'negative catalyst watch' by Jefferies.
London's heavyweight energy stocks also were performing poorly, with BP down 1.6% and Shell down 1.5%.
Brent oil fetched USD83.22 a barrel, lower than USD84.95, while gold was quoted at USD1,772.73 an ounce early Tuesday, lower than USD1,776.79 on Monday.
In the FTSE 250, SSP added 2.3% in early trade.
The travel-focused food outlet operator said revenue jumped to GBP2.19 billion in the financial year that ended September 30 from GBP834.2 million the year prior. It swung to a pretax profit of GBP25.2 million from a loss of GBP411.2 million.
The recovery is being led by the domestic and leisure travel market across both air and rail sectors. Business and commuter travel is recovering, albeit more slowly, SSP noted.
Looking ahead, SSP said it is confident in its ability to manage macro-economic headwinds, and anticipates a further recovery in the medium term. It expects annual revenue to be between GBP2.9 billion and GBP3.0 billion in the current financial year.
"We see significant potential for further expansion in North America - a USD6 billion market in which we currently on
On AIM, Croma Security Solutions jumped 21%.
The security services provider announced it plans to dispose of its Vigilant guarding division, to refocus on developing its high margin and cash generative Locks and Systems businesses.
"The strategy of combining Locks and Systems with the Vigilant manned guarding division has not generated the opportunities for cross-marketing and cross-sales that had been expected," Croma explained.
Croma's executive chair, Sebastien Morley, is part of Vigilant's management team, which has expressed an interest in acquiring the division. To pursue this, Morley has agreed to step down from the board at the end of the day's annual general meeting.
In Asia on Tuesday, the Japanese Nikkei 225 index closed up 0.2%. In China, the Shanghai Composite was marginally higher, while the Hang Seng index in Hong Kong was down 0.6%. The S&P/ASX 200 in Sydney closed down 0.5%.
Tuesday's economic calendar has a UK construction PMI at 0930 GMT, and US trade data at 1330 GMT.
By Elizabeth Winter, senior markets reporter
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