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(Alliance News) - Stock prices in London were slightly lower at midday on Thursday after US inflation hit a 40-year high on Wednesday, while the pound showed little reaction to calls for UK Prime Minister Boris Johnson to resign.
The FTSE 100 index was down 6.49 points, or 0.1%, at 7,545.23. The mid-cap FTSE 250 index was down 42.34 points, or 0.2%, at 23,004.82. The AIM All-Share index was up 0.15 of a point at 1,174.46.
The Cboe UK 100 index was flat at 748.69. The Cboe 250 was down 0.2% at 20,561.03, and the Cboe Small Companies was up 0.1% at 15,731.58.
The CAC 40 in Paris stock index was down 0.3%, and the DAX 40 in Frankfurt was 0.1% lower.
New York was pointed to a slightly higher open. The Dow Jones Industrial Average was called 0.1% higher, the S&P 500 up 0.2%, and the Nasdaq Composite marginally higher, based on futures trading.
"Stocks slid lower almost everywhere on Thursday as chances of an accelerated hawkish switch from the Fed continue to weigh on global market sentiment. Despite Jerome Powell's latest comments that indicated a hawkish pivot could take more time than initially expected, yesterday's news that US inflation hit 7% in December revived concerns of a much quicker switch from the Fed," said ActivTrades analyst Pierre Veyret.
In the FTSE 100, Persimmon was among the worst performers, down 1.5%, amid wider sector concerns pertaining to cladding costs.
The York-based housebuilder said total revenue in 2021 was GBP3.61 billion, up from GBP3.33 billion in 2020. New housing revenue was GBP3.45 billion, up from GBP3.13 billion.
Persimmon said it delivered 14,551 new home completions in 2021, up from 13,575 in 2020, with an average selling price of GBP237,050, up from GBP230,534.
Addressing sector concerns, Persimmon said it agreed with the UK government that leaseholders should not have to pay to remove flammable cladding.
Persimmon said it constructed only a "very small proportion" of buildings affected by this issue, which caused the deadly fire at the Grenfell Tower in 2017. In common with the rest of the housebuilding industry, it will shortly begin paying the cladding levy announced in the UK budget, it noted.
Peers Barratt Developments, Taylor Wimpey and Berkeley were down 1.5%, 1.0% and 1.4% respectively in a negative read-across.
Tesco was down 1.5% despite the UK's largest supermarket chain reporting a strong festive period.
The grocer said it expects a retail operating profit for the financial year that ends in February "slightly above" estimates of GBP2.5 billion to GBP2.6 billion, which would be as much as a 31% rise on the profit of GBP1.99 billion in financial 2021.
Total retail sales for the group were up 2.6% on a one-year like-for-like basis in the 19 weeks ended January 8, 2022. Over Christmas, sales grew 3.2% on a year before, and Tesco achieved the highest market share growth in Ireland.
"Shareholders seem a little less impressed, with the shares falling back in early trade. This seems a little churlish response but may have more to do with the fact that the shares are close to their highest levels in 11 months. It certainly doesn't mean they can't go higher longer term," commented CMC Markets analyst Michael Hewson.
In the FTSE 250, John Wood was the top gainer, up 21%, after the energy services provider reported that revenue and profit fell in line with guidance for 2021.
John Wood posted revenue for 2021 of around USD6.4 billion, down 14% on a like-for-like basis, with growth in Consulting and Operations more than offset by a significant decline in Projects. However the Aberdeen-based firm noted a stronger second half of trading with "improving momentum" across its businesses.
John Wood also reiterated plans to sell its built-environment unit within Consulting. After a review the group said it had concluded that a full sale process was the best option to deliver value for shareholders and that the process is now underway. A sales agreement is expected to be announced in the second quarter.
At the other end of the midcaps, Countryside Properties was the worst performer, down 27%, after the housebuilder announced the immediate departure of Chief Executive Officer Iain McPherson and said first quarter trading was below management expectations.
The Countryside CEO is departing by mutual agreement, the company said, after two years in the role since 2019. McPherson has been part of the company for eight years since 2014, starting as managing director for the Southern Housebuilding business.
Countryside has started a process to find a permanent replacement for McPherson, and Chair John Martin will stand in an interim CEO while the search is ongoing.
The Brentwood, Essex-based housebuilder said its performance for the first quarter of its current financial year was short of management expectations.
For the three months that ended December 31, Countryside's adjusted operating profit fell 55% to GBP16.5 million from GBP36.6 million the same period a year before, on adjusted revenue that declined 31% to GBP249.8 million from GBP363.8 million.
On AIM, ASOS was up 11% after the online fashion retailer revealed plans to move to the London Main Market, saying it has outgrown AIM after 20 years, most of that time as its biggest listing.
ASOS, which stands for "as seen on screen", long dominated the junior market, though its current market capitalisation of GBP2.42 billion places it fifth in size on AIM.
Currently the largest stock traded on AIM is Hutchmed (China) with a GBP4.18 billion market cap, followed by Abcam and Fevertree Drinks. The move would put ASOS in contention to join the FTSE 250 index.
ASOS also provided a trading update for the last four months of 2021. Total revenue rose by 2.1% to GBP1.39 billion from GBP1.36 billion a year before. In constant currency, the increase was 5%.
AJ Bell's Russ Mould noted: "AIM has historically been a place for young growth companies. Once they start to become a much bigger business, it is only natural to shift listings to the Main Market which is more the domain of longer-established companies or businesses that have successfully disrupted a market and are now generating decent profits. ASOS certainly fits in the latter category.
"ASOS should have made the move years ago given how it has progressed from being a UK business selling goods mimicking those worn by celebrities on the TV or in films, to now being an international online retailer."
Online fashion rival, and fellow AIM listing, boohoo was up 4.5% in a positive read-across.
The dollar was lower across the board as the foreign exchange market digested a string of remarks by US Federal Reserve officials.
The euro was priced at USD1.1478, up from USD1.1425 late Wednesday. Against the Japanese yen, the dollar was trading at JPY114.40, down from JPY114.73.
An official at the US Federal Reserve would be open to supporting more than three interest rate rises this year if inflation surges higher, he told the Financial Times. Patrick Harker, president of the Philadelphia branch of the Federal Reserve, became the latest US central bank official to back a rate hike in March.
"I currently have three increases in for this year, and I'd be very open to starting in March," Harker said in an interview with the newspaper. "I'd be open to more if that's required." The comments come after recent data showed inflation in the US ended 2021 at its highest level in 40 years.
The consumer price index print for December showed the highest rate of inflation since June of 1982 at 7.0%, following a 6.8% annual rise in November.
In addition, the Fed's second in command Lael Brainard said US inflation is "too high" and the Federal Reserve will make the issue a priority.
The Fed's "most important task" is to focus on "getting inflation back down to two percent while sustaining a recovery that includes everyone," Brainard said in remarks prepared for delivery at her nomination hearing before the Senate Banking Committee on Thursday.
The pound was quoted at USD1.3740 at midday on Thursday, up from USD1.3693 at the London equities close Wednesday.
Johnson's tenure as UK prime minister is increasingly reliant on the outcome of a potentially bombshell report being prepared by a senior official, as he faced brazen calls for his resignation from his own backbenchers.
The PM apologised on Wednesday for attending a "bring your own booze" party in the Downing Street garden in May 2020, when the rest of the country was in lockdown.
Johnson insisted he thought the party was work-related, but said he recognised "with hindsight I should have sent everyone back inside". He said an inquiry headed by senior official Sue Gray was examining the situation but accepted "there were things we simply did not get right and I must take responsibility".
The scandal prompted furious Tory members of Parliament to call for the prime minister to resign. And although Cabinet ministers jumped into action to defend Johnson, the late interventions of Foreign Secretary Liz Truss and Chancellor Rishi Sunak - both tipped as potential successors - did little to instil confidence in his future.
Analysts at ING commented: "The pound is not embedding any political risk at the moment, which would in theory make it vulnerable to the downside if markets start to see the recent developments as a net-negative factor for the currency. We doubt, however, this will be the case, and a new prime minister (Chancellor Rishi Sunak appears to be the front runner) may not automatically have any negative implications for the GBP outlook.
"If anything, there may be a bigger risk for sterling associated with post-Brexit trade negotiations with the EU. UK Foreign Secretary Liz Truss (another name that has circulated to succeed Johnson) will meet EU officials today to discuss the still unsolved Northern Ireland dispute. The EU has already signalled that a suspension of the NI protocol would trigger a trade retaliation."
Brent oil was quoted at USD84.80 a barrel Thursday at midday, down from USD84.68 late Wednesday. Gold stood at USD1,823.60 an ounce, up a touch from USD1,822.60.
Thursday's economic calendar has US producer prices and the latest jobless claims numbers at 1330 GMT.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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