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(Alliance News) - The FTSE 100 was unable to sustain Wednesday morning's modest gains as the mood was weighed down by spiralling UK inflation pressures.
The UK inflation rate spiking above 10% has raised further concerns over the cost-of-living crisis - which will come as unwelcome news to consumer-facing stocks such as Cineworld, which was already struggling on Wednesday after issuing a warning over disappointing cinema admissions.
The FTSE 100 was down 30.03 points, or 0.4%, at 7,506.03. The FTSE 250 index was down 124.84 points, or 0.6%, at 20,211.57. The AIM All-Share index was down 4.14 points, 0.4%, at 927.40.
The Cboe UK 100 was down 0.4% at 750.16, the Cboe UK 250 was down 0.6% at 17,531.01, and the Cboe Small Companies down 0.1% at 14,426.80.
The FTSE 100 in London initially nudged a touch higher in early dealings, before feeling the heat from a double-digit UK inflation reading as the morning dragged on.
UK inflation accelerated at the fastest pace in 40 years in July, numbers on Wednesday showed. The consumer price index surged 10.1% on an annual basis in July, topping FXStreet-cited market consensus of 9.8%. Inflation quickened from 9.4% in June.
A year earlier, the inflation rate was just 2.0% - matching the Bank of England's target. However, there has been an acceleration in annual inflation every month since last October.
The pound was quoted at USD1.2103 midday Wednesday in London, up ever-so-slightly from USD1.2099 late Tuesday.
Sterling traded at roughly USD1.2120 shortly before the inflation reading, however, and very briefly hit USD1.2140 after - but, with Wednesday's inflation data firming up expectations of another chunky interest rate hike from the Bank of England, concerns were once again swirling over the strength of the UK economy.
"Rising interest rates are expected to hold back an economy already struggling. As the cost of living continues to rise – with food, raw materials and energy all costing more – household and business incomes will be squeezed. This should mean lower economic output," City Index market analyst Fawad Razaqzada commented.
In London, NatWest and Lloyds Banking got a boost, on the expectation of stronger rate hikes by the Bank of England. They were up 0.8% and 0.4%.
Made.com and ProCook, stocks which the market has already lost a large amount of confidence in, struggled, however.
Furniture seller Made.com was down 6.8%, while pots and pans seller ProCook gave back 6.2% on consumer disposables income fears.
Mainland European equities were trading firmly in the red on Wednesday, with the CAC 40 in Paris down 0.3%, while the DAX 40 in Frankfurt was 0.5% lower.
The euro stood at USD1.0172 midday Wednesday in London, down slightly from USD1.0177 at the European equities close on Tuesday.
The eurozone economy grew at a slightly slower pace than expected in the second quarter. The eurozone's seasonally adjusted GDP increased by 0.6% during the second quarter of 2022, compared with the previous quarter. However, it undershot a July flash estimate of 0.7% growth.
Against the previous year, seasonally adjusted GDP increased by 3.9% in the euro area, in line with a flash estimate.
Against the yen, the dollar was trading at JPY134.85, up from JPY134.28.
Gold stood at USD1,772.89 an ounce midday Wednesday, down slightly from USD1,774.80 at the London equities close on Tuesday. Brent oil was quoted at USD92.84, down from USD93.04.
Still to come in the international economics calendar on Wednesday are US retail sales at 1330 BST, before the latest US Federal Reserve meeting minutes at 1900 BST.
Oanda analyst Craig Erlam commented: "What's interesting about them is that despite the supposed 'dovish pivot' from the Fed, the commentary since has been anything but. Rather than talking up the prospect of falling inflation allowing for slower tightening, the message remains hawkish. What's more, policymakers are continually pushing back against the policy u-turn next year that markets have been flirting with the idea of.
"I expect any hawkish components of the minutes will be overlooked today, and instead traders will dissect them for any additional dovish concessions that could further fuel the stock market recovery. That's very much what we've seen in recent weeks, and the decline in CPI last week only encouraged it."
Stocks in New York were called lower on Wednesday ahead of the Fed minutes. The Dow Jones Industrial Average was called down 0.4%, the S&P 500 down 0.6% and the Nasdaq Composite 0.8% lower.
In London, Cineworld shares were a massive 48% lower at midday. The one-time FTSE 250 constituent has now fallen 82% over the past 12 months.
The Picturehouse chain operator said the number of film goers has been "below expectations" recently, which it put down to a weaker film slate.
"Consequently, the group has been taking proactive steps to ensure it has the balance sheet strength and flexibility to adapt to market conditions. This includes significant previously disclosed operational and financial initiatives to manage costs and enhance liquidity," Cineworld warned.
Cineworld said it is in "active discussions with various stakeholders" to mull ways to bolster its coffers and possibly restructure its balance sheet, though a "comprehensive deleveraging transaction".
It cautioned that any deleveraging is likely to dilute the value of its shares.
Peer Everyman was 0.5% lower. Everyman's estate comprises of just under 40 cinemas, while Cineworld has about 750 across the globe.
By estate, Cineworld towers over Everyman. By market capitalisation, however, there is now not a lot to separate the two. Everyman has a market value of GBP111.1 million, while Cineworld's now stands at GBP150.5 million.
Also sliding was Ladbrokes and Coral owner Entain, down 2.9%. It has been fined for its failures in social responsibility and anti-money laundering, according to a UK regulator.
The UK Gambling Commission said the FTSE 100-listed firm will pay GBP17 million, for shortcomings at its online business and land-based businesses.
The Gambling Commission said one punter was able to deposit GBP742,000 in 14 months without an "appropriate" source-of-funds check.
The UK gambling sector has fallen under tighter regulatory scrutiny in recent years. A GBP2 maximum stake for fixed-odds betting terminals has been implemented, a ban on customers depositing online using credit cards has also been introduced, and there is the possibility of stricter affordability checks on consumers also being implemented.
On AIM, Revolution Beauty surged 26%, while boohoo was down 2.8%.
Online-only retailer boohoo said it has made a "strategic investment" in beauty products seller Revolution Beauty Group. It now has a 7.1% stake.
"The investment builds upon the existing relationship between boohoo and Revolution Beauty, under which Revolution Beauty products are sold through several of the group's direct to consumer brand websites and its online digital department store, Debenhams. The investment reflects boohoo's belief in the growth potential of Revolution Beauty and it intends to be a supportive stakeholder and long-term partner," boohoo explained.
Revolution Beauty stock has been hit in recent weeks by a warning on cost inflation and a statement that its auditors found "certain accounting issues" that could have a "material impact" on results for the year ended February 28, 2022.
Balfour Beatty topped the FTSE 250s, surging 8.6% after upping its profit outlook.
For the half year ended July 1, the construction firm's revenue was largely unchanged year-on-year at GBP4.15 billion. Pretax profit more than doubled to GBP83 million from GBP35 million.
Balfour raised its dividend by 17% to 3.5 pence per share from 3.0p.
"Driven by this performance and also the strength of the order book, the board expects underlying profit from operations to be ahead of its previous expectations," Balfour said.
By Dominique Pretorius; dominiquepretorius@alliancenews.com and Eric Cunha; ericcunha@alliancenews.com
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