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(Alliance News) - Stock prices in London were lower at midday on Wednesday as an uptick in UK and eurozone consumer prices heightened inflation concerns, while attention turns to the release in the evening of the minutes of the latest US Federal Reserve policy meeting.
The FTSE 100 index was down 77.20 points, or 1.1%, at 6,957.04. The mid-cap FTSE 250 index was down 107.84 points, or 0.5%, at 22,224.96. The AIM All-Share index was down 0.3% at 1,235.49.
The Cboe UK 100 index was down 1.2% at 694.60. The Cboe 250 was down 0.5% at19,996.59, and the Cboe Small Companies down 0.7% at 1,230.84.
In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were down 1.0% and 1.2% respectively.
Analysts at ActivTrades said: "European benchmarks extended losses on Wednesday, as inflation concerns and virus spikes in Asia offset market optimism about the recovery. Energy and travel shares are among the worst performers as most major indices failed to clear their main resistance level this week ahead of today's highly anticipated release of the FOMC minutes.
"This report will be crucial to many investors as they will need to be certain the Fed, and other central banks, will keep sustaining the market in the short to mid-term at least. More precisely, investors remain curious as to how the Fed determines the 'transitory' effect of mounting prices, what interpretation it makes out of it, and what impact it will have on the near-term outlook."
In the FTSE 100, Ferguson was still the best performer at midday, up 2.8%, 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 was up 0.5%, 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 closed up 1.5% on Tuesday.
At the other end of London large-caps, Anglo American was the worst performer, down 4.4%. The miner said 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.
BAE Systems was 1.2% lower after the defence contractor said sales and earnings guidance at constant currency for all of 2021 remain unchanged.
Severn Trent was 0.7% lower at 2,480.00 pence after the utility announced a share issue to raise GBP250 million, which it will put towards environmental projects endorsed by UK regulator Ofwat.
Severn Trent will offer shares in a placing, together with a retail offer via PrimaryBid. The placing will be conducted via an accelerated bookbuild run by Merrill Lynch International and Morgan Stanley & Co International, and the price for the offer will be set at the end of the bookbuild.
The new shares will represent up to 5% of the existing total.
Severn Trent said the fresh cash will go towards six projects worth GBP624 million. These were supported by Ofwat as part of its Green Recovery Award for the water sector announced on Monday. Ofwat on Monday said the award will result in GBP850 million of new spending across the UK water sector, and GBP1.9 billion of planned green projects from water companies will be brought forward.
In the FTSE 250, John Laing was the best performer, up 11% at 400.08 pence after the infrastructure investor received a GBP2.0 billion takeover offer from Aqueduct Bidco, a newly formed company owned by funds advised by Kohlberg Kravis Roberts.
Under the terms of the offer, each John Laing shareholder will receive 403 pence in cash for each John Laing share. The offer is a 27% premium to the closing price of 318p on May 5, which was the last date prior to the announcement by John Laing that it was in discussions with KKR and is an 11% premium to Tuesday's closing price of 361.00p.
"The John Laing board believes that the offer from KKR represents an attractive and certain value in cash today for John Laing shareholders and reflects the high quality of the business, its people and future prospects, as well as providing a positive outcome for John Laing pensioners," said Chair Will Samuel.
Future was just behind, up 8.0%, after the magazine publisher said 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.
Looking ahead, Future said it has started the third quarter ahead of management expectations and expects full-year results to be "materially ahead" of market forecasts.
Dunelm Group was up 5.8%. The home furnishings retailer said full-year earnings would be better than expected after pent up demand drove soaring sales as lockdown restrictions are eased.
Dunelm said sales for the first seven weeks of its fourth quarter, beginning March 28, increased 59% against the equivalent period two years prior. Sales growth had been very strong since the majority of its stores re-opened on April 12, Dunelm noted, and growth from digital sales was also encouraging.
The pound was quoted at USD1.4160 at midday Wednesday, falling from USD1.4189 at the London equities close Tuesday and responding to UK inflation data.
UK consumer prices picked up sharply in April as coronavirus restrictions eased, according to the latest figures from the Office for National Statistics.
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.
Earlier this month, the Bank of England reiterated that it does not intend to tighten monetary policy until there is "clear evidence" that inflation can achieve the bank's 2.0% target sustainably. Further, the BoE had said it anticipates CPI inflation to temporarily rise above the target towards the end of 2021 as the economy reopens.
"Expectations for when the Bank of England might move interest rates have been little changed since the end of the first quarter. Like other central banks, the Old Lady expects a rise in inflation but for this to prove transitory - perhaps the word of the moment in finance. The market already understands that the BoE's quantitative easing should naturally taper given its set capacity, unlike the Federal Reserve whose flow-based approach does not have a pre-determined end point. Therefore, the next change in policy is more likely to be related to interest rates and that still seems a long way off," said Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson.
The euro was priced at USD1.2203 at midday, flat from USD1.2206 late Tuesday.
Consumer prices rose in Europe in April, figures from Eurostat showed. The euro area annual inflation rate was 1.6% in April, accelerated from 1.3% in March. A year earlier, the rate was 0.3%.
Against the yen, the dollar was trading at JPY109.20, up from JPY108.94.
Brent oil was quoted at USD67.40 a barrel Wednesday at midday, down from USD69.36 late Tuesday. Gold was trading at USD1,855.04 an ounce, down from USD1,868.50.
New York stock market futures were pointed lower as investors weighed the global inflation outlook ahead of the release of the US Federal Reserve's meeting minutes at 1900 BST.
The Dow Jones Industrial Average was called down 0.7%, the S&P 500 index down 0.8% and the Nasdaq Composite down 1.2%.
The central bank has repeatedly stressed it will maintain its easy-money stance, but volatility in markets show investors remain unconvinced by those assurances.
The minutes of the Fed's April meeting could give a fuller view of FOMC members' thoughts about rising prices.
"The market will focus keenly on any clues to the timing of a reduction in bond buying, and an ultimate increase in interest rates moving higher. Pressure has already been building, with both reported inflation and market expectations soaring above the Fed's average 2% inflation target, and boosting broader market volatility. Last week's jump in inflation to 4.2% will only have added to that pressure," said eToro analyst Ben Laidler.
"Nonetheless, we expect the Fed to remain consistent in viewing the current inflation spike as transitory, whilst waiting for signs of a stronger labor market before considering tapering. Anything different is likely to add to current market volatility. A tapering announcement is coming by the end of this year, but we don't think the economy - or the Fed - is quite there yet," Laidler added.
On the corporate front, JPMorgan Chase promoted two female executives Tuesday who are potential successors to Chief Executive Jamie Dimon as it announced several leadership shifts near the top of the bank.
The biggest US bank by assets, JPMorgan, said in a securities filing that Marianne Lake and Jennifer Piepszak would serve as co-chiefs of its Consumer & Community Banking business, putting the two executives in line to potentially take over from Dimon.
Last year, peer Citigroup appointed Jane Fraser as its new CEO, making her the first woman to run a Wall Street bank.
JPMorgan noted the division's current chief, Gordon Smith, will retire at the end of 2021. Daniel Pinto will become the bank's lone president and chief operating officer. The stock was 1.4% lower in pre-market trade in New York.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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