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(Alliance News) - Stock prices in London opened higher on Wednesday, despite another batch of disappointing data from China, as the world second-largest economy slumped into deflation.
All eyes are now on a US inflation print due out Thursday. Unlike China, where investors wanted to see signs that the economy was heating up, the hope for the US is that inflation cools.
The FTSE 100 index opened up 56.87 points, 0.8%, at 7,584.29. The FTSE 250 was up 144.27 points, 0.8%, at 18,985.81, and the AIM All-Share was up 2.23 points, 0.3%, at 761.07.
The Cboe UK 100 was up 0.8% at 756.62, the Cboe UK 250 was up 0.7% at 16,619.41, and the Cboe Small Companies was up 0.1% at 13,603.09.
China slipped into deflation as consumer prices contracted last month for the first time in more than two years, official data showed, as slowing domestic spending weighs on the country's post-Covid economic recovery.
The consumer price index, the main gauge of inflation, fell 0.3% in July, the National Bureau of Statistics said, having flatlined in June. Analysts polled by Bloomberg had anticipated a 0.4% decline in the index for July.
Prices rose 0.2% month-on-month in July, having fallen 0.2% in June from May.
"These figures will amplify concerns regarding China's potential for economic growth and the efficiency of conventional measures to boost the economy," said SPI Asset Management Stephen Innes.
Innes, however, noted that the poor data is not really much of a surprise. It is the second round of disappointing data for the Chinese economy this week.
China suffered its biggest drop in exports for more than two years, data on Tuesday showed. Sales of Chinese products to foreign markets plunged 14.5% on-year in July, a third consecutive drop, according to the customs authority.
Meanwhile, CMC Markets Michael Hewson said: "Chinese deflation has been the proverbial elephant in the room when it comes to recent tightening measures from the Federal Reserve, the ECB, and Bank of England. How many more rate hikes can we expect in the coming months when there is a clear deflationary impulse coming from Asia, and where is the tipping point when it comes to the risk of overtightening."
On Thursday, there will be inflation data from the US. According to FXStreet-cited consensus, the headline annual inflation rate in the US is expected to pick up to 3.3% in July, from 3.0% in June.
On Tuesday, a leading US Federal Reserve official said he thinks interest rates may have peaked but warned they will need to stay inflated for a while.
In a speech, Patrick Harker, president of the Federal Reserve Bank of Philadelphia said: "Absent any alarming new data between now and mid-September, I believe we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work."
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.5%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.8%.
In the FTSE 100, Flutter Entertainment lost 4.7%, as caution on its Australian unit overshadowed strong trading in the US and UK.
Flutter Entertainment reported that revenue in the first half of 2023 rose by 42% on-year to GBP4.81 billion from GBP3.39 billion. It swung to a pretax profit of GBP83 million in the period from a loss of GBP51 million.
It noted that its US arm reached a "profitability inflection point". Its US arm swung to an adjusted Ebitda of GBP49 million, from a loss of GBP132 million a year prior.
Looking ahead, the company said its second half has started in line with expectations. Assuming "normalised" sports results, it expects its full-year adjusted Ebitda to land in line with guidance.
Excluding the US, it expects an adjusted Ebitda between GBP1.44 billion and GBP1.6 billion, helped by "strong momentum" in the UK, Ireland and some of its international markets. This will be "offset by softer than expected market conditions in Australia".
In the US, it expects an adjusted Ebitda between GBP90 million and GBP190 million, with net revenue between GBP3.6 billion and GBP3.9 billion.
Coca-Cola HBC rose 2.6%.
It reported that revenue in the six months to June 30 rose to EUR5.02 billion, from EUR4.21 billion in the six months ended July 1, 2022. Pretax profit more than doubled to EUR527.6 million from EUR234.4 million.
Looking ahead, the soft drink bottler upped its full-year guidance. It expects mid-teens full-year organic revenue growth, previously it had expected growth between 5% to 6%.
In the FTSE 250, interdealer broker TP ICAP jumped 9.1%.
Revenue in the first half of the year climbed 4.8% to GBP1.13 billion from GBP1.08 billion a year prior.
Pretax profit improved 26% to GBP91 million from GBP72 million.
TP ICAP said it benefitted from rising volatility during the half, particularly in its Global Broking division.
"Rates had another strong period benefiting from market volatility, interest rate rises and the high inflationary backdrop in the first six months. In Energy & Commodities, the first half reflected improved market conditions following a challenging 2022. European gas and power prices normalised during the period which lowered client margin requirements resulting in improved trading volumes," the company said.
TP ICAP declared a 4.8p per share interim dividend, up 6.7% from 4.5p.
In addition, it said it is launching a GBP30 million share buyback programme.
"We will continue to assess opportunities to free up more cash to pay down more debt, and/or initiate further buybacks," it said.
"Dynamic capital management is a key element of our strategy. The GBP100 million of cash we targeted in the first half last year has been freed up 6 months ahead of schedule; it will be used to pay down debt."
CLS Holdings lost 3.2%.
CLS reported that revenue in the first half of 2023 fell to GBP72.3 million from GBP68.3 million a year earlier. It swung to a pretax loss of GBP106.4 million from a profit of GBP21.3 million.
Looking ahead, CLS said that the economic backdrop for the property market has been challenging, and it expects it to remain so until interest rates have definitively peaked.
In European equities on Wednesday, the CAC 40 in Paris was up 1.3%, while the DAX 40 in Frankfurt was up 1.0%.
After jumping 17% on Tuesday, Novo Nordisk lost 2.4% in Copenhagen early Wednesday, giving it a market capitalisation of DKK1.87 trillion, around EUR251 million, and putting it up there with among Europe's largest.
The Bagsvaerd, Denmark pharmaceutical company on Tuesday announced positive headline results from the Select cardiovascular outcomes trial assessing chronic weight management medicine Wegovy.
Wegovy, also known as semaglutide, is a GLP-1 receptor agonist indicated as an adjunct to a reduced-calorie diet and increased physical activity for chronic weight management.
LVMH, Europe's largest firm by market cap, has a value of EUR409.42 billion.
In Asia on Wednesday, the Nikkei 225 index in Tokyo closed up 0.5%. In China, the Shanghai Composite closed up 0.5%, while the Hang Seng index in Hong Kong was up 0.1% in late trade. The S&P/ASX 200 in Sydney closed up 0.4%.
The pound was quoted at USD1.2773 early on Wednesday in London, higher compared to USD1.2718 at the equities close on Tuesday. The euro stood at USD1.0977, higher against USD1.0947. Against the yen, the dollar was trading at JPY143.10, up compared to JPY143.29.
Brent oil was quoted at USD85.97 a barrel early in London on Wednesday, up from USD84.92 late Tuesday. Gold was quoted at USD1,930.82 an ounce, higher against USD1,925.90.
Still to come in the economic calendar on Wednesday, there is industrial production and turnover data from Ireland at 1100 BST.
By Sophie Rose, Alliance News reporter
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