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(Alliance News) - Stock prices in London opened sharply lower on Wednesday amid rising inflation fears, while John Laing led the FTSE 250 after agreeing to a GBP2 billion takeover from private equity firm KKR.
The FTSE 100 index was down 82.19 points, or 1.2%, at 6,952.07. The mid-cap FTSE 250 index was down 127.02 points, or 0.6%, at 22,203.93. The AIM All-Share index was down 0.3% at 1,235.49.
The Cboe UK 100 index was down 1.2% at 693.60. The Cboe 250 was down 0.5% at 20,000.59, and the Cboe Small Companies down 0.2% at 14,841.00.
In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were down 1.3% and 1.2% respectively.
In Asia, the Japanese Nikkei 225 index ended down 1.5% on Wednesday. In China, the Shanghai Composite closed down 0.5%, while markets were closed in Hong Kong for the National Day holiday. The S&P/ASX 200 in Sydney finished 2.0% lower.
In the FTSE 100, Ferguson was the best performer, up 4.0%, after the plumbing and heating products supplier said it delivered 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 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 0.7%, extending gains from Tuesday after the tobacco company 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 the large-caps, Severn Trent was 0.8% 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 toward 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.
"Whilst the board has full confidence in John Laing's strategy and management team, it is clear that many of the initiatives are at an early stage of development, retain an element of execution risk and that it will take time for these to deliver value. 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 10%, after the magazine publisher said it delivered a robust first-half performance extending its track record of growth in revenue, and profit. Future calls itself a "global platform for intent-led specialist media".
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.
C&C Group was up 5.5% after Berenberg upgraded the Dublin-based drinks manufacturer and distributor to Buy from Hold.
The pound was quoted at USD1.4192 early Wednesday, little changed from USD1.4189 at the London equities close Tuesday, after UK inflation data.
UK inflation picked up sharply in April as coronavirus restrictions eased, according to the latest figures from the Office for National Statistics on Wednesday.
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.
Analysts at ING said: "We expect inflation to edge higher again next month, and reach 2% for the first time over the summer, before remaining there through the fourth quarter and first quarter of next year.
"Ultimately though, what matters for the Bank of England is what happens to inflation in 2022 and beyond, and there aren't many clues in this latest data. But at this stage we think headline CPI will most likely dip back below target from around April next year. Much will depend on wage pressures, which despite the green shoots appearing in the jobs market, we think will most likely be fairly benign."
The euro was priced at USD1.2237, up from USD1.2206. Against the yen, the dollar was trading at JPY109.011, up from JPY108.94.
Brent oil was quoted at USD67.90 a barrel Wednesday morning, down from USD69.36 late Tuesday. Gold was trading at USD1,870.04 an ounce, up slightly from USD1,868.50.
The economic events calendar on Wednesday has eurozone consumer prices at 1000 BST. US MBA mortgage applications are at 1200 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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