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(Alliance News) - Energy firms were struggling in London on Wednesday as oil prices came under pressure, sending the FTSE 100 lower.
"It's been another disappointing day for the FTSE 100, with a slide in energy prices weighing on the likes of BP and Shell, with both crude oil and natural gas prices sliding for the second day in succession," CMC Markets analyst Michael Hewson said.
"Up until the end of last week the FTSE 100 had been on course for a positive month, however the last 3 days, and the hawkish tone from Powell's Jackson Hole speech, has seen the rug pulled out from underneath the positive mood."
The FTSE 100 index closed down 77.48 points, or 1.1%, at 7,284.15 on Wednesday. The mid-cap FTSE 250 index ended down 85.90 points, or 0.5%, at 19,063.75. The AIM All-Share index closed down 4.58 points, or 0.5%, at 882.73.
The Cboe UK 100 index closed down 0.9% at 728.12. The Cboe 250 ended down 0.3% at 16,387.54, and the Cboe Small Companies down 0.1% at 13,937.72.
IG analyst Joshua Mahony said: "Unfortunately, the prominence of commodity stocks within UK markets has proven its undoing, with energy names Tullow Oil, Energean, and BP feeling the pinch as oil looks to be heading for the worst losing run in over two months."
Tullow closed 6.2% lower, Energean 4.3% and BP 1.7%. Larger peer Shell ended the day down 2.1%.
Brent oil was trading at USD97.05 a barrel, down from USD99.99 late Tuesday and nearly USD10 below this week's peak above USD105.
CMC's Hewson added: "We're also seeing declines in the likes of National Grid, SSE and Centrica as concerns about a windfall tax on some of their profits resurfaces."
National Grid closed down 4.1%, SSE 3.4%, and Centrica 1.1%.
"Due to the way that electricity prices are linked to the gas price, some companies are reaping huge profits given their electricity is being generated by renewables, which has a lower cost of generation. This is giving these companies a nice windfall, which governments are starting to cast an envious eye over," Hewson continued.
In mainland Europe, the CAC 40 in Paris was down 1.4%, while the DAX 40 in Frankfurt was down 1.0%.
The annual eurozone inflation rate hit a fresh high of 9.1% in August. July's inflation rate was 8.9%. August's rate was expected to edge up to 9.0%, according to FXStreet.
Energy prices remained elevated, though the increase eased nominally to 38% in August from 40% in July. Food, alcohol & tobacco prices ticked up, rising 11% versus 9.8% in July.
Core inflation - which strips out energy, food, alcohol and tobacco - accelerated to an annual rate of 4.3% in August from 4.0% in July. A year ago, the rate was 1.6%.
The euro initially fell in the wake of the inflation data but has since staged a minor rebound, trading at USD1.064 on Wednesday, up from USD1.0022 late Tuesday.
Sterling was quoted at USD1.1638, lower than USD1.1662 at the London equities close on Tuesday. Against the yen, the dollar reversed morning losses to trade at JPY138.64, soft from JPY138.75.
Back in London, LondonMetric Property lost 3.6%. Berenberg cut the property investor to 'sell' from 'hold' as part of a comprehensive note on the real estate sector.
"The environment is certainly the toughest in over a decade...Our headline view is hence that these macroeconomic factors will set the tone for the sector and that we expect sentiment to remain weak," said Berenberg.
Peer Tritax Big Box REIT lost 3.3%, also suffering from a Berenberg downgrade. Berenberg moved the stock to 'hold' from 'buy'.
In the small caps, Cineworld jumped 44%.
The Greidinger family confirmed owning 20% of total issued share capital, after falsely claiming the identity of its largest shareholder in the most recent annual report.
Cineworld said the Greidinger family owns 276 million shares in the company. Of these, one million shares are owned by Global City Holdings BV and 275 million shares are owned by Global City Theatres BV, both of which are owned by trusts for the benefit of the children of Moshe Greidinger and Israel Greidinger.
However in its 2021 annual report, Cineworld stated that its largest shareholder is Dutch holding firm Global City Holdings, who only owns about 0.1% of the cinema operator's stock.
Earlier this month, Cineworld confirmed it was considering its options, including potentially filing for US Chapter 11 bankruptcy, as it grapples with liquidity woes.
In AIM, Cake Box tumbled 40% after warning on full-year profit.
The eggless cake maker said inflationary pressure has increased, and it has only managed to pass part of this onto franchisees, meaning its full-year gross margin will be hit. This has been compounded by weaker-than-expected sales at the franchise level during July and August.
"Accordingly, due to the worsening outlook and increasing cost of living pressures on the consumer, the group now expects full year profitability to be significantly below current market forecasts," Cake Box said, adding that it does not expect inflationary pressures to ease up before the end of its financial year next March.
Wall Street was in the red at the end of London equities session. The Dow Jones was down 0.3%, while the S&P 500 and the Nasdaq Composite were both down 0.2%.
Job creation in the US slowed for a second straight month in August, according to payroll processor ADP's retooled monthly jobs report. The private sector added 132,000 jobs in August, down from 270,000 in July.
The ADP report serves as a precursor to Friday's nonfarm payrolls.
Gold was quoted at USD1,720.40 an ounce, below USD1,725.60 late on Tuesday.
In the international economic events calendar on Thursday, there is a slew of manufacturing PMI data, with Japan and China prints overnight, followed by France at 0850 BST, Germany at 0855 BST, the eurozone at 0900 BST and the UK at 0930 BST. There is US S&P Global manufacturing PMI at 1445 BST followed by the ISM figure at 1500 BST.
Alongside the PMI data, there is UK Nationwide housing prices and German retail sales at 0700 BST, followed by Swiss consumer inflation at 0730 BST. There is eurozone unemployment figures at 1000 BST, followed by initial jobless claims in the US at 1330 BST.
In the local corporate calendar, there is interim results from agriculture and engineering services firm Camellia, window, door and roofline PVC products maker Eurocell, textile rental firm Johnson Service Group and PPHE Hotel Group. FTSE 250-listed software company Kainos Group will issue a trading statement.
By Paul McGowan; paulmcgowan@alliancenews.com
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