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(Alliance News) - European stocks took a hit on Wednesday as inflationary fears swept across the continent, with plunging cryptocurrencies adding further negativity to the downbeat session.
CMC Chief Market Analyst Michael Hewson said: "Having posted a new record high only yesterday, the DAX has slid for the second day in succession, along with the rest of Europe's markets. The FTSE 100 has also fallen back sharply towards last week's lows, over concern that supply chain, as well as worker shortages could threaten the economic recovery. As a consequence this could mean that inflationary pressures might become more persistent in the longer term."
The FTSE 100 index closed down 84.04 points, or 1.2%, at 6,950.20. The mid-cap FTSE 250 index ended down 98.03 points, or 0.4%, at 22,234.53. The AIM All-Share index closed down 0.9% at 1,228.98.
The Cboe UK 100 index closed down 1.4% at 692.68. The Cboe 250 ended down 0.5% at 19,994.48, and the Cboe Small Companies down 0.5% at 14,787.14.
In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were down 1.4% and 1.8%, respectively.
Hewson continued: "While stock market investors appear to be concerned about increasing inflation risk, given that appears to be today's narrative, bond markets appear less so if US 10-year yields are any guide to today's price action. They are slightly lower.
"That said, weakness in commodity prices isn't exactly helping sentiment either, after Chinese authorities suggested curbs on aggressive increases in prices which has clobbered the mining sector, with the likes of Antofagasta, Anglo American, BHP, Rio Tinto and Glencore all down heavily."
Blue chip miners Anglo American lost 5.0%, Antofagasta 3.4%, Rio Tinto 3.5%, BHP 4.6% and Glencore gave back 3.4%.
Anglo also noted its diamond business De Beers posted lower sales for its fourth sales cycle of 2021, as the spread of Covid-19 in India, where most diamonds are cut and polished, led to lower demand for rough stones in an already slow time of year.
For the provisional fourth sales cycle - which reflects the period from May 3 to May 18 - De Beers posted rough diamond sales of USD380 million, down 16% from USD450 million in the third sales cycle.
IG Senior Market Analyst Joshua Mahony said: "Unfortunately, the prospect of continued asset purchases and rock bottom rates continues to come into question, with a raft of new inflation readings released today. With UK and Canadian CPI both on the rise, there is no doubt that the trajectory for prices remains upwards as the reopening takes shape.
"One particular area of interest comes in the form of factory prices, with the 9.9% UK PPI reading highlighting the dramatic rise of materials over the past year. Those prices may be on the way down if today is anything to go by, with commodities such as copper, iron ore, and nickel all heavily down today. However, perhaps the most dramatic mover on the commodity market has been the unlikely 2020 poster child, with lumber having lost a third of its value since last Monday."
Brent oil was quoted at USD66.06 a barrel Wednesday evening, down from USD69.36 late Tuesday. Gold was trading at USD1,883.00 an ounce, up from USD1,868.50.
London's oil majors slipped with both Shell 'A' shares and 'B' shares down 2.8%, while peer BP lost 2.7%.
Experian lost 1.9% but predicted strong growth ahead after it performed well in its recent financial year.
The FTSE 100-listed, London-based credit-checking firm posted revenue of USD5.37 billion for the year that ended March 31, up 7% at an actual rate and 4% organically, from USD5.18 billion the previous year.
Organic revenue growth for the final quarter was 5%, at the top end of guidance, Experian noted.
Despite growth globally, Experian's UK and Ireland business shrank, with revenue down 6% to USD737 million. However, it noted the region returned to growth for the fourth quarter.
Pretax profit rose 14% to surpass the billion-dollar mark at USD1.08 billion, up from USD942 million.
Looking ahead, Experian is forecasting organic revenue growth in the range of 15% to 20% for the first quarter. It also was buoyant in its full-year guidance, predicting organic revenue growth between 7% and 9% and total revenue growth between 11% and 13%.
At the other end of the FTSE 100, Ferguson advanced 2.2% after the plumbing and heating products supplier reported revenue and profit growth ahead of expectations in the third quarter.
For the three months to April 30, revenue was USD5.92 billion, up 25% from USD4.75 billion a year ago, and underlying trading profit was USD560 million, up 69% from USD333 million.
Ferguson said US market demand accelerated through the quarter as the US economy continued to re-open.
Given the better-than-expected results, Ferguson revised its outlook for financial 2021 upwards as it said it expects to continue to outperform strong end-markets in the fourth quarter.
Ferguson expects to generate group trading profit in the range of USD2.00 billion to USD2.10 billion in the financial year that ends July 31. In financial 2020, trading profit, which excludes exceptional items and amortisation of acquired intangible assets, was USD1.67 billion, up 8.6% from financial 2019.
In addition, Berenberg raised the stock to Hold from Sell.
Imperial Brands gained 1.4%, extending gains from Tuesday. The tobacco company had said it was on track to meet its guidance for its financial year after a resilient first half of trading. The stock had closed up 1.5% on Tuesday.
In the midcaps, magazine publisher Future PLC ended the best performer, up 12%, after it delivered a robust first-half performance extending its track record of growth in revenue and profit.
For the six months to March 31, revenue was GBP272.6 million, up 89% from GBP144.3 million last year, and pretax profit was GBP56.9 million, doubled from GBP27.1 million.
The Bath, England-based company said revenue growth was driven by the Media division's improved performance, in particular digital advertising on-platform organic growth of 30% and e-commerce affiliates' organic growth of 56%.
Its US subsidiary, meanwhile, achieved revenue growth of 31% on an organic basis, Future said, and UK revenue grew by 5% organically.
Future also reported record user "engagement", with total reach of 419 million audience numbers a month, and online user growth of 31% year-on-year to 311 million.
The pound was quoted at USD1.4155 late Wednesday, falling from USD1.4189 at the London equities close Tuesday and responding to UK inflation data.
UK inflation picked up sharply in April as coronavirus restrictions eased, according to the latest figures from the Office for National Statistics on Wednesday.
On an annual basis, UK consumer prices rose 1.5% in April, accelerating from inflation of 0.7% in March. The latest reading just beat market consensus, cited by FXStreet, for a 1.4% increase.
Consumer price inflation rose 0.6% month-on-month in April, quickening from a 0.3% rise in March. The print was in-line with market forecasts.
In the eurozone, consumer price inflation ratcheted up in April, figures from Eurostat showed on Wednesday.
The euro area annual inflation rate was 1.6% in April, picking up pace from 1.3% in March. A year earlier, the rate was 0.3%. Prices rose 0.6% month-on-month.
EU-wide annual inflation was 2.0% in April, up from 1.7% in March. A year earlier, the rate was 0.7%.
The euro was priced at USD1.2216 at the equities close on Wednesday, up from USD1.2206 late Tuesday.
Against the yen, the dollar was trading at JPY108.68, down from JPY108.94.
Bitcoin plunged by 30% on Wednesday after China signalled a new crackdown on the cryptocurrency and tycoon Elon Musk hinted that his Tesla car company could unload its huge holdings in the unit.
The virtual currency fell to almost USD30,000 – less than half the record value it reached last month – before climbing back over USD33,000. It was still above its level at the start of the year.
IG's Mahony said: "The collapse across the entire realm of cryptocurrencies has many fearful of the economic implications of such capital destruction. With institutions having taken a more keen role over this latest bull-run, the repercussions of another extended crypto-capitulation could be more widespread compared with 2018. For some the institutional involvement in Bitcoin has helped bolster the case for its future inclusion as a mature asset class. However, that institutional involvement could ultimately result in greater regulation if its collapse sparks a wider fallout for financial markets."
New York equity markets were lower at the London close. The DJIA was down 1.2%, with the S&P 500 index 1.0% lower and the Nasdaq Composite down 0.8%.
Focus will be on the release of the US Federal Reserve's meeting minutes at 1900 BST. The minutes of the Fed's April meeting could give a fuller view of FOMC members' thoughts about rising prices.
In the international economics calendar on Thursday, there is a People's Bank of China interest rate decision overnight, with German producer prices due at 0800 BST, eurozone construction output at 1100 BST and US initial jobless claims at 1430 BST.
In the local corporate calendar, there are half-year results from budget airline easyJet and full-year results from National Grid and Royal Mail. B&Q-owner Kingfisher will publish a trading statement.
By Paul McGowan; paulmcgowan@alliancenews.com;
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