Alliance Trust Share News (ATST)

LONDON (Alliance News) - A quiet start to a holiday-shortened week for the London stock market saw prices slip back from modest gains to small losses Tuesday, while the latest reading of eurozone's consumer price index showed inflation in the single currency bloc remained in negative territory.

The flash estimate of CPI for May, published by Eurostat, showed consumer prices dropped 0.1% from last year, as expected by economists after easing 0.2% in April.

Core inflation, which excludes energy, food, alcohol and tobacco, slowed slightly to 0.8% in May from 0.7% a month ago.

Jonathan Loynes, chief European economist at Capital Economics, was somewhat surprised by the inflation reading, having previously expected the recent rise in oil prices to have supported CPI more in May. However, the decline in energy prices slowed only slightly, with a 8.1% annual decline compared to April's 8.7% fall.

Nevertheless, Loynes expects firm oil prices to support inflation going forward.

"Unless oil prices drop back sharply, headline inflation will climb over the coming months as negative energy effects finally fade. But core price pressures are set to remain subdued, not least due to the continued weakness of wage growth," Loynes said.

The eurozone jobless rate remained stable at the lowest level in more than four years. The unemployment rate came in at 10.2% in April, the same rate as seen in March, and in line with expectations. This was the lowest rate recorded in the euro area since August 2011.

At midday, the FTSE 100 traded down 0.1%, or 8.17 points, to 6,262.62. The FTSE 250 was down 0.1% at 17,212.43 points, and the AIM All-Share was flat at 735.60 points.

In Europe, the French CAC 40 and the German DAX 30 both were down 0.3%.

Futures pointed to a higher open on Wall Street. The Dow Jones Industrial Average and Nasdaq 100 were expected to open up 0.2% and the S&P 500 index up 0.1%.

The focus now will be on the core US personal consumption expenditure price index at 1330 BST, the Federal Reserve's preferred measure of inflation.

"The core PCE deflator is expected by consensus to come in at 1.6% for the year, basically in-line with its 20-year average. In fact, more inflation rates that exclude the effects of oil prices are in-line or above their 20-year averages. US interest rates, of course, are nowhere near their 20 year averages," noted Paul Donovan, global economist at UBS.

There also is US consumer confidence at 1500 BST.

In UK corporate news, shares in Alliance Trust traded up 3.3% after RIT Capital confirmed a "very preliminary" interest in the investment company.

The Financial Times had reported over the weekend that RIT, the FTSE 250 investment trust chaired by Jacob Rothschild, had approached Alliance Trust about a tie-up. A deal would create a company with a value by market capitalisation of more than GBP5.0 billion.

"The possibility of combining the two companies for the benefit of both sets of shareholders is at a very preliminary stage of consideration," RIT said in a statement.

Under takeover rules, RIT must announce a firm intention to make an offer for Alliance Trust by 1700 BST on June 27 or walk away.

Shares in RIT Capital traded down 1.5%.

Brewin Dolphin Holdings, up 1.8%, was benefiting from an upgrade by Shore Capital to Buy from Hold. Shore said the current management team has done a good job over the past few years in turning round the struggling wealth manager, but progress has since stalled. This leaves the company vulnerable to a takeover approach.

Kainos Group went from being one of the best performers in the FTSE All-Share to the worst, down 5.0%. The IT and software service provider, which listed in London last July, reported growth in profit in its recently ended financial year, as revenue was boosted by favourable market conditions in the UK public sector and contracts with government departments.

The group said its pretax profit in the year ended March 31 grew by 20% to GBP14.3 million from GBP11.8 million the year before, as revenue rose by more than a quarter to GBP76.6 million from GBP60.8 million.

Kainos said it continued to see an improvement in market conditions in the UK public sector as large central government departments and agencies initiate and progress "digitisation programmes".

Asia-Pacific online gaming and media company PCG Entertainment traded down 36% after it said it is in disputes with a supplier and a principal customer which could "materially affect the company's trading and financial position going forward".

PCG said the dispute with the supplier arose from a debt repayment due to be paid to the supplier by Kolarmy Technology. The company said it has become aware that Kolarmy has not repaid the debt, resulting in a dispute between PCG and the supplier, the latter which is now seeking repayment from PCG. Kolarmy is the former major shareholder of Center Point Development Corp, which PCG bought in 2015.

On top of this, PCG said it is also in dispute with a principal customer over trading terms previously agreed. PCG added that it is taking advice and is seeking to resolve the disputes amicably.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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