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(Alliance News) - Stock prices in London opened lower on Wednesday, as high oil prices gave rise to fears of renewed inflationary pressures and interest rate hikes.
The FTSE 100 index opened down 63.01 points, 0.9%, at 7,374.92. The FTSE 250 was down 103.48 points, 0.6%, at 18,387.94 and the AIM All-Share was down 1.29 points, 0.2%, at 738.76.
The Cboe UK 100 was down 0.8% at 734.26, the Cboe UK 250 was down 0.6% at 16,052.05, and the Cboe Small Companies was marginally lower at 13,428.81.
In European equities, the CAC 40 in Paris was down 0.8%, while the DAX 40 in Frankfurt was down 0.3%.
The recent climb in oil prices is at the forefront of investors' minds.
On Tuesday, the Saudi Arabian energy ministry said the kingdom's production cut of one million barrels per day which first took effect in July will continue "for another three months until the end of December 2023". Russia's export cut of 300,000 barrels per day will continue for the same period, Deputy Prime Minister Alexander Novak said in a separate statement.
Brent oil was trading at USD89.61 a barrel early Wednesday, slightly lower than USD90.31 late Tuesday, but still elevated from its recent levels.
Further, there is also the potential for further fluctuation in natural gas prices. Workers at two major Chevron liquefied natural gas facilities in Australia have declared their intention to strike for a two-week period amid an ongoing dispute about pay and working conditions.
The Offshore Alliance union, representing employees at the Gorgon and Wheatstone LNG projects in Western Australia, disclosed that the strike will commence on September 14.
The dispute between the workers and Chevron has been intensifying, with both parties struggling to find common ground in their negotiations.
"Already wholesale prices had been inching up, given that these plants at Gorgon and Wheatstone account for more than 5% of global capacity. It's feared that if no resolution is found, and a period of prolonged industrial action is sparked, it'll disrupt chilled gas exports from Australia, provoke bidding wars for other LNG supplies, and cause yet more inflationary pressure," said Hargreaves Lansdown's Susannah Streeter.
The dollar had gained ground on Tuesday, but returned some of its gains on Wednesday morning. Traders are considering the possibility that renewed inflationary pressures from the energy market could lead to a greater likelihood of further interest hikes from central banks across the world. It could also help to keep interest rates higher for longer.
The euro traded at USD1.0739 early Wednesday, higher than USD1.0713 late Tuesday. Against the yen, the dollar was quoted at JPY147.34, down versus JPY147.66.
Sterling was quoted at USD1.2577, up from USD1.2564, but remained lower than in recent weeks.
"UK data, particularly the PMI services snapshot for August has painted a picture of a slowing British economy and is helping to reinforce bets that the Bank of England won't go as high in the UK as the market had been predicting just weeks ago," HL's Streeter considered.
The prospect of a lower peak for UK interest rates is a much-needed piece of good news for London-listed housebuilders, who have struggled with damped customer demand amid a volatile mortgage market.
The latest update came from Barratt Developments, which reported bottom-line progress in its recently concluded financial year, despite lower completions.
In the year to June 30, pretax profit rose 9.8% to GBP705.1 million from GBP642.3 million a year before, as revenue edged up just 1.0% to GBP5.32 billion from GBP5.27 billion. Completions fell 3.9% to 17,206 from 17,908, which the firm said reflected the market slowdown experienced from September 2022.
On an adjusted basis, pretax profit fell 16% to GBP88.43 million as adjusted operating margin fell to 16.2% from 20.0%.
It proposed a final dividend of 23.5 pence per share, bringing the annual total to 33.7p, behind the previous year's payout of 36.9p. It said there would be "no further share buybacks at this stage".
"The cut to the dividend is inevitably disappointing but a prudent move in a tightening environment. While there has been havoc in the sector, resulting for example in the imminent relegation of peer Persimmon from the premier index, Barratt has managed to hold up well in relative terms," said interactive investor's Richard Hunter.
Persimmon will leave the FTSE 100 on September 18, as founding member Marks & Spencer returns to the large-cap index.
Barratt shares were down 1.8% with Persimmon down 2.0%, among the worst performers in the FTSE 100.
Meanwhile, in the midcap index, Bridgepoint was up 2.0%.
Bridgepoint said it has added Energy Capital Partners to its platform, in a cash and shares acquisition worth GBP835 million. "ECP is a market leader in value-add infrastructure specialising in energy transition and sustainability-focused investing," the private equity investor said.
Following the acquisition, which is subject to shareholder approval, it plans to split the roles of CEO and chair. William Jackson will be chair and continue to focus on the core private equity business. Meanwhile, managing partner Raoul Hughe, an "architect of both ECP and Bridgepoint Credit transactions", will become CEO from October 1. Hughes will lead the business on a day-to-day basis, and join the ECP board.
Further, Bridgepoint announced plans for a new GBP50 million share buyback. It has currently repurchased GBP43 million of its existing GBP50 million programme.
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.6%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.1%.
In Asia on Wednesday, the Nikkei 225 index in Tokyo closed up 0.6%. In China, the Shanghai Composite added 0.2%, while the Hang Seng index in Hong Kong was up 0.1% in late dealings. The S&P/ASX 200 closed down 0.8%.
Gold was quoted at USD1,925.80 an ounce, little changed from USD1,926.63.
The economic calendar has a UK construction PMI print at 0930 BST, EU retail sales at 1000 BST and two services PMI readings for the US from 1445 BST. There will also be an interest rate decision from the Bank of Canada.
By Elizabeth Winter, Alliance News senior markets reporter
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