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(Alliance News) - Stocks in London ended mostly lower on Wednesday with underwhelming earnings weighing on the FTSE 100, while rising UK inflation bolstered the case for an interest rate hike from the Bank of England next month.
The FTSE 100 index closed down 35.77 points, or 0.5%, at 7,291.20. The FTSE 250 ended down 105.64 points, or 0.5%, at 23,434.07. The AIM All-Share index closed down 1.67 points, or 0.1%, at 1,246.88.
The Cboe UK 100 index ended down 0.6% at 722.50. The Cboe 250 ended down 0.4% at 20,913.60. The Cboe Small Companies ended down 0.1% at 15,586.30.
In Paris, the CAC 40 stock index closed up 0.2%, while the DAX 40 in Frankfurt ended marginally higher.
"It's been another disappointing session for the FTSE 100, once again finding itself undermined by several disappointing company earnings reports, and a rather hot October UK inflation report, which saw CPI hit its highest level in over a decade, while the retail price index hit its highest level in over 30 years," said CMC Markets analyst Michael Hewson.
In the FTSE 100, Sage Group ended the standout performer, up 9.7%, after the accounting software provider said it sees organic recurring sales growth accelerating in the year ahead, while margins should improve.
Full-year revenue fell 3% to GBP1.85 billion. However, organic recurring revenue grew 5% to GBP1.64 billion, which Sage said was underpinned by Sage Business Cloud growth of 19%. Pretax profit for the financial year, which ended September 30, dipped to GBP347 million from GBP373 million.
Looking ahead, Sage expects organic recurring revenue growth to accelerate in its new financial year, seen in the region of 8% to 9%. Organic operating margin is "expected to trend upwards in FY22 and beyond", after dipping 2.7 percentage points to 19.3% in the recently ended financial year.
At the other end of the large-caps, Spirax-Sarco Engineering said it still expects to report record results for 2021, despite the manufacturer of thermal energy management and pumping systems pointing to supply chain issues. The stock shed 4.9%.
Spirax-Sarco noted that industrial production sector recovered from Covid-19 pandemic in the third quarter of 2021; however, disruptions in the global supply chain led to material shortages and rising costs.
The Cheltenham, England-based company said it continued to experience very strong demand, with order books in all three of its businesses expanding in the four months to the end of October above expectations. Less positively, Spirax-Sarco noted that all of its three businesses were hurt by shipment delays, but the effects have been greater within Watson-Marlow and Electric Thermal Solutions.
SSE lost 4.3%. The UK power utility confirmed a Bloomberg report that it plans to sell electricity network interests to fund investment in its renewables arm.
Setting out its 'net zero acceleration programme' alongside its interim results, SSE said it plans an additional GBP1 billion per year in capital expenditure on renewables, fully funded from the sale of minority interests in its Transmission and Distribution arms. SSE also said it will rebase its dividend to 60 pence per share in financial 2024 with an "attractive" yearly rise of at least 5% to March 2026.
Experian finished 4.0% lower. The credit checking agency posted double-digit growth in the first half of its financial year, with the credit checking firm raising annual guidance and lifting its payout.
The Dublin-based firm said revenue in the six months to September 30 rose 23% year-on-year to USD3.06 billion from USD2.49 billion. Pretax profit increased 43% annually to USD654 million from USD458 million. At constant currency, revenue grew 21%, while pretax profit was up 32%.
Informa closed down 3.0% after the business publisher and events organiser reconfirmed its guidance for 2021, as its trading continued to improve.
The London-based company said it expects to report revenue of GBP1.80 billion and adjusted operating profit of GBP375 million. In comparison, Informa posted revenue of GBP1.66 billion and adjusted operating profit of GBP267.8 million in 2020.
Informa reported strong growth in the year-to-date in subscriptions-led businesses and building momentum across its three B2B markets businesses - Informa Markets, Informa Tech and Informa Connect.
In the FTSE 250, CMC Markets ended the worst performer, down 11%, after the online trading company slashed its interim dividend after a much weaker performance compared to a year before, due to a fall in market volatility and activity.
For the six months ended September 30, CMC reported pretax profit of GBP36.0 million, a 74% fall from GBP141.1 million the same period a year before, as net operating income dropped 45% to GBP126.7 million from GBP230.9 million.
CMC declared an interim dividend of 3.50 pence per share, down 62% from 9.20p a year prior.
Looking ahead, CMC reiterated its prior guidance for its current financial year, and expects net operating income for the year to be between GBP250 million and GBP280 million, reflecting a 32% to 39% fall from GBP409.8 million the year before, though in line with or higher than GBP252.0 million in financial 2020.
Elsewhere in London, McColl's Retail plunged 16% after the convenience store chain said it expects to post significantly lower results than initially anticipated for its current financial year.
The Brentwood, England-based company said its adjusted earnings before interest, tax, depreciation and amortization for the 52 weeks to November 28 is seen in the range of GBP20 million to GBP22 million. For financial 2020, the company posted adjusted Ebitda of GBP29.1 million.
Sterling rallied against the dollar after data from the Office for National Statistics showed UK inflation spiked in September, further augmenting calls for an interest rate hike from the Bank of England in December.
The pound was quoted at USD1.3465 at the London equities close, up from USD1.3430 at the close Tuesday.
The annual UK inflation rate surged to 4.2% in October, accelerating sharply from a 3.1% rise in September. Consensus, cited by FXStreet, had been anticipating a figure of 3.9%.
This was the highest 12-month inflation rate since November 2011, when it was 4.8%. The Bank of England recently warned inflation could peak at around 5.0% in April next year.
Spiralling consumer prices present a fresh headache for Bank of England Governor Andrew Bailey ahead of the central bank's rate decision next month. Earlier in November, the BoE defied calls for a rate hike pointing "a high degree of uncertainty" about the near-term outlook for the labour market.
On Tuesday, the ONS said the UK jobless rate eased more-than-forecast to 4.3% in the three months to September from 4.5% for the three months to August.
Shane O'Neill, head of Interest Rate Trading for Validus Risk Management, commented: "This higher-than-expected print will give the Bank of England incentive to increase rates at their next meeting in December. They disappointed markets in November by holding off on a rate hike despite it being fully priced in - citing slowing demand and growth concerns - critics at the time suggested that the Bank was not acting to curb runaway inflation and this print will go some way to validate these critics.
"After yesterday's strong employment data, the missing piece of the puzzle according to Governor Bailey, there is seemingly little reason to expect the Bank not to hike, though this thinking has scuppered traders before. If the first post-furlough employment data point, released shortly before the bank's December meeting, confirms the strength of the employment market and inflation, as seen today, continues higher - it is going to look more and more like the bank missed an opportunity in November."
The euro stood at USD1.1309 at the European equities close, down from USD1.1347 late Tuesday. The single currency fell to an intraday low of USD1.1254 versus the greenback in early trade - its lowest level since July 2020.
The growth rate of consumer prices in the euro area during October accelerated to its highest level in over a decade, data from Eurostat showed.
The eurozone annual inflation rate was 4.1% in October, up from 3.4% in September. Not since July 2008 has inflation been at a higher level. The highest contribution to the euro area inflation rate came from energy, as Europe's ongoing energy shortage continues to drive up prices.
Services, non-energy industrial goods, and food, alcohol & tobacco were the next biggest contributing industries to price rises.
The figures came as European Central Bank President Christine Lagarde pushed back on talks of rate rises even as far out as 2023.
Her deputy Luis de Guindos told Bloomberg TV Wednesday that "the reality check is going to be the evolution of inflation next year".
"If you look at the drivers, the transitory nature of these drivers of inflation are quite clear," he added - suggesting no shift in eurozone monetary policy for now.
Against the yen, the dollar was trading at JPY114.51, up a touch from JPY114.50 late Tuesday.
Stocks in New York were lower at the London equities close after an upbeat finish on Tuesday.
The DJIA was down 0.5%, the S&P 500 index down 0.2% and the Nasdaq Composite down 0.1%.
On Wall Street, Visa slumped 5.0% after e-commerce giant Amazon.com announced it would stop accepting payments in the UK made with Visa credit cards, blaming the move on high fees.
Brent oil was quoted at USD81.58 a barrel at the London market close, down from USD82.00 at the same time the close Tuesday.
Gold stood at USD1,864.44 an ounce at the close, higher against USD1,858.07 late Tuesday.
The economic events calendar on Thursday has the latest US jobless claims numbers at 1330 GMT.
The UK corporate calendar on Thursday has interim results from UK power lines operator National Grid, postal services provider Royal Mail and health and safety group Halma.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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