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(Alliance News) - Stock prices in London were lower midday Wednesday, with Omicron concerns continuing to spook fragile markets, while inflationary pressure ratchet up ahead of key central bank meetings.
"Caught between constantly rising inflation and the prospect of a dramatic explosion in Omicron cases, the UK economic picture looks more unstable than ever," IG analyst Joshua Mahony commented.
The FTSE 100 index was down 15.17 points, or 0.2%, at 7,203.47 midday Wednesday, knocked as well by a firm pound.
The mid-cap FTSE 250 index fell 49.65 points, or 0.2%, at 22,501.04. The AIM All-Share index was up just 0.52 of a point at 1,165.19.
The Cboe UK 100 index was down 0.3% at 714.53. The Cboe 250 was down 0.3% at 19,919.14, while the Cboe Small Companies was down 0.5% at 14,721.70.
The UK's annual inflation rate accelerated to 5.1% in November, from 4.2% in October, according to the Office for National Statistics. The Bank of England's inflation target is 2%.
November's figure was above market estimates of 4.7%, according to FXStreet.
The pound was quoted at USD1.3251 midday Wednesday, fading from an intraday high of GBP1.3282, but still up from USD1.3231 at the London equities close on Tuesday.
"Nonetheless, with a rapid spread of this variant brings expectation that cases will peak and fall back in a significantly shorter timeframe than previous waves. Thus, it looks likely that the Bank of England will look to hold off this time around in the hope that UK Omicron cases will be on a downward trajectory once the February meeting comes around," Mahony said.
The euro stood at USD1.1265 on Wednesday afternoon, down from USD1.1275 late Tuesday. Against the yen, the dollar was trading at JPY113.83, up from JPY113.70.
In mainland Europe, the CAC 40 stock index in Paris was up 0.6%, while the DAX 40 in Frankfurt was 0.3% higher, outperforming London.
The eurozone faces inflationary pressures of its own. Annual consumer inflation in France accelerated to 2.8% in November from 2.6% in October.
CPI in Italy raced to 3.7% in November, from 3.0% in October, and in Spain, November consumer inflation was at a robust 5.5%, inching up from 5.4% in October.
The Bank of England and European Central Bank reveal interest rate decisions on Thursday. The US Federal Reserve is the main event on Wednesday.
ActivTrades analyst Pierre Veyret commented: "The Fed is widely expected to extend and accelerate its tapering program to tackle the rising price pressure in the US and pave the way for rate hikes next year, all of which should have a significant impact on the long-term stock rally we have been witnessing since March 2020. However, traders will still scrutinize the tone and wording Jerome Powell uses as worries about the dovish stance withdrawal linger, especially after the recent batch of poor macro data."
Ahead of the Fed policy decision, US stock market futures were called lower. The Dow Jones Industrial Average was called marginally lower, the S&P 500 down 0.1%, and the Nasdaq Composite down 0.4%. An interest rate hike will be particularly painful for tech stocks.
In pre-market trade on Wednesday in New York, Apple and Twitter were down 0.3% and Amazon down 0.4%.
In London, DCC was the best large-cap performer, rising 7.3%, and shaking off a downgrade to Underweight from Equal Weight by analysts at Barclays.
The Dublin-based sales, marketing and support services firm unveiled the acquisition of Almo, its largest to date at an enterprise value of USD610 million.
Almo is a US sales, marketing and distribution business which operates in fields such a consumer electronics, appliances and lifestyle products.
Almo was bought in a deal with the Chaiken family, who have owned and managed the company since it formed 75 years ago.
Analysts at Davy commented: "It also adds new US consumer verticals in appliances and lifestyle products along with a nationwide distribution infrastructure for these larger, logistically more challenging, consumer products. Combined with Almo's highly experienced management team, these provide very material additional consolidation opportunities for DCC Technology."
Rentokil Initial fell 5.3%. The stock extended losses from Tuesday, when the pest control firm's acquisition of a US peer was eventually poorly received, after an initial share price rally.
Cineworld tumbled 28%. The movie house operator said a Canadian court has ruled against it in the case brought by jilted takeover target Cineplex.
The court has ordered Cineworld to pay to Cineplex CAD1.23 billion, about GBP720 million, in lost synergies and CAD5.5 million in transaction costs.
Cineworld said it will appeal the judgement and no damages will be payable during appeal. Cineworld had agreed to the acquisition before the Covid-19 pandemic and cancelled it as lockdowns closed cinemas.
Elsewhere in London, several stocks were caught in the cross-hairs of UK Covid-19 fears. Among them were Wagamama-owner Restaurant Group, down 3.7%, low-cost gym operator Gym Group, down 3.8% and greeting cards seller Card Factory, down 5.1%.
UK Prime Minister Boris Johnson on Tuesday suffered the largest rebellion since taking office as nearly 100 Tory members of Parliament voted against measures that usher in the mandatory use of Covid passes.
The new measures passed the Commons thanks to the support of Labour, but the PM's attempts to quell a rebellion on his own backbenches failed as a large number of his MPs defied the whip to vote against him on the issue of the passes, which have also been known as vaccine passports.
Some 96 Conservative MPs voted against the Covid pass regulations for England. Two Tory MPs also acted as tellers for the noes. While 369 MPs, including opposition members, backed the move, giving a majority of 243.
Before Tuesday, the biggest rebellion Johnson had faced was in December 2020, against the strengthening of Covid-19 tier restrictions in England.
Gold stood at USD1,768.97 an ounce midday Wednesday, down from USD1,775.45 late Tuesday. Brent oil was quoted at USD72.72 a barrel, down from USD73.23.
Still to come on Wednesday are US retail sales figures at 1330 GMT.
By Eric Cunha; ericcunha@alliancenews.com
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