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(Alliance News) - Blue-chip European equities dramatically gave up morning gains by Wednesday afternoon, as an EU energy crisis loomed, grabbing more market attention as the session progressed.
The European Commission on Wednesday urged EU countries to reduce their demand for natural gas by 15% over the coming winter months to overcome Russia's energy supply "blackmail".
In a statement, the EU's executive arm also asked member states to give it special powers to force through needed demand cuts if Russia cuts the Europe's gas lifeline.
The FTSE 100 was down 26.24 points, or 0.4%, at 7,270.04 midday Wednesday. It had been 0.7% higher earlier in the session.
The FTSE 250 index pared earlier losses but was up 74.71 points, or 0.4%, at 19,357.30. The AIM All-Share index added 3.82 points, or 0.4%, at 892.52.
The Cboe UK 100 index was down 0.3% at 724.99. The Cboe 250 was up 0.5% at 16,885.41 and the Cboe Small Companies was up 0.6% at 13,372.39.
In mainland Europe, the CAC 40 stock index in Paris was down 0.4%, while the DAX 40 in Frankfurt was 0.3% lower.
On Tuesday and early Wednesday, equities were supported after Reuters on Tuesday reported Russian gas flows via the Nord Stream 1 pipeline are seen restarting on time on Thursday following the completion of scheduled maintenance. The news agency cited two sources familiar with the export plans.
However, European Commission President Ursula von der Leyen accused Russia of blackmail on Wednesday.
"Russia is blackmailing us. Russia is using energy as a weapon and therefore, in any event, whether it's a partial major cut off of Russian gas or total cut off...Europe needs to be ready," Von der Leyen told reporters.
A hotter-than-expected UK inflation print failed to lift the pound, despite its like impact on the thinking of Bank of England policymakers. Sterling was quoted at USD1.1981 early Wednesday, down from USD1.2030 at the London equities close on Tuesday.
The UK inflation rate raced to 9.4% in June, figures on Wednesday showed, beating market forecasts and hitting a series high.
The annual pace of price increases accelerated from 9.1% in May and also topped FXStreet-cited market consensus of 9.3%.
The Bank of England's inflation target is 2%.
Governor Andrew Bailey on Tuesday mooted a possible 50 basis point interest rate hike next month. At the annual Mansion House speech in the City of London on Tuesday, Bailey said a 50 basis point rise – from 1.25% to 1.75% – would be one of the options for the Monetary Policy Committee.
So far, the UK central bank has opted for smaller interest rate rises, although some of the MPC members have argued for quicker rate rises.
Analysts at financial services firm Ebury said it is "high time" the BoE enacts a more aggressive 50 percentage point rate hike, something already done by the Reserve Bank of Australia and the US Federal Reserve. The Fed lifted rates by 75 points last month.
There is also a growing conviction the ECB could turn to a 50-basis-point hike. The ECB issues its latest decision on Thursday. It previously said it will enact its first interest rate hike since 2011 this week, tipping a 25-point rise.
Producer price inflation in Germany remained rampant. The annual rate of inflation was at a stubbornly high 32.7% in June, thought it slowed slightly from May's 33.6%, which was a record pace.
The Bank of Japan, meanwhile, is expected to stand pat on Thursday. The People's Bank of China on Wednesday left its own benchmark rates unchanged.
The euro stood at USD1.0187 midday Wednesday in London, down from USD1.0245 at the European equities close on Tuesday. Against the yen, the dollar was trading at JPY138.22, up from JPY137.77.
New York stock index futures were lower, also hurt by the European energy supply crisis. The Dow Jones Industrial Average and the S&P 500 are both pointed 0.2% lower, and the Nasdaq Composite down 0.1%.
US tech earnings will be in focus after streaming service Netflix impressed overnight. Tesla reports later on Wednesday, and Twitter, jilted by the electric car maker's founder, Elon Musk, takes centre stage on Friday.
Netflix shares were up 6.2% in pre-market trade in New York on Wednesday after the streaming service reported second-quarter earnings growth overnight, boosted by hit series 'Stranger Things'.
In London, Royal Mail shares fell 2.3%. It unveiled plans for a name change and said it will consider a separation should its UK arm continue to struggle, while its GLS distribution unit shines.
The FTSE 250 constituent said it will change its name to International Distributions Services PLC. It is a move that reflects the importance of GLS, on which the company said it has become "increasingly" reliant.
GLS, Royal Mail's international parcel arm, reported revenue growth during the first quarter ended June, while the eponymous Royal Mail unit in the UK saw a double-digit decline.
It is that sort of underperformance which may prompt the parent to mull a separation.
Chair Keith Williams said: "Whilst GLS delivered a solid performance in the first quarter, the performance of Royal Mail was disappointing with an adjusted operating loss of GBP92 million resulting from of a decline in parcel volumes post the pandemic and a lack of progress in delivering efficiencies.
"The pandemic boom in parcel volumes bolstered by the delivery of [Covid-19] test kits and parcels is over. Royal Mail is currently losing one million pounds per day and the efficiency improvements which are needed for long-term success have stalled. We can however be a long-term success story. We have advantages in scale and reach and a strong balance sheet and asset base which are the foundations for a successful future. We need to act now in moving to that future in the interests of all stakeholders, employing those advantages to the maximum."
Royal Mail was one of the worst mid-cap performers.
At the other end, Playtech added 3.5% after Jefferies resumed coverage of the gambling software firm with a 'buy' rating'.
Centamin climbed 4.0%. The gold miner said it remains on-track to meet full-year production guidance and is focused on controlling costs amid an inflationary environment.
Gold production of 110,788 ounces in the second quarter of 2022 was up 11% year-on-year and 19% higher than the first three months of 2022. This was due to its being the first full quarter of underground owner operations at Sukari as well as improved open pit grade.
Guidance for 2022 gold production was maintained at 430,000 ounces to 460,000 ounces.
Morses Club plunged 43%. The AIM-listed home collected credit provider has turned to a scheme of arrangement to deal with customer redress claims for unaffordable lending.
The company said it has "adequate liquidity for the immediate future" though its future could be jeopardised without a scheme, due to the amount of redress claims.
Morses said it has "tightened" lending policies and warned it will not make a profit in the 12 months ended February 25, 2023, which it dubs a transitional year as it resolves "legacy issues". In addition, it will not recommend a final dividend for recently-ended financial 2022.
"The board is confident that the group can return to profitability during FY24," it added.
Provident Financial and Amigo Holdings are among the listed lenders to have similarly gone down the route of scheme of arrangements to settle redress claims recently. Provident was up 0.1% on Wednesday and Amigo up 6.1%.
Brent oil was quoted at USD105.47 a barrel midday Wednesday, down from USD105.85 at the London equities close on Tuesday. Gold stood at USD1,711.30 an ounce, down from USD1,714.05.
By Eric Cunha; ericcunha@alliancenews.com
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