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(Alliance News) - Blue-chip equities in Europe traded off morning lows heading into Tuesday afternoon, but the mood was still cautious, with traders mindful of the US midterm election.
The FTSE 100 index was down 4.49 points, 0.1%, at 7,295.50 at midday in London. The FTSE 250 was down just 6.77 points at 18,552.80, and the AIM All-Share was up 1.26 points, 0.2%, at 826.07.
The Cboe UK 100 was down 0.1% at 729.57. The Cboe UK 250 was up 0.1% at 16,014.28, and the Cboe Small Companies was 0.2% higher at 12,550.06.
Stocks in mainland Europe were similarly mixed. The CAC 40 in Paris was flat, while the DAX 40 in Frankfurt was 0.3% higher.
The DAX was supported by gains from the German automotive sector, with Mercedes-Benz rising 1.3% and parts supplier Continental up 1.4%. Conversely, in Paris, a share price fall for car maker Renault kept a lid on the CAC 40.
"The FTSE 100 started Tuesday on the back foot as the latest in a seemingly regular dose of political turmoil looms on the horizon in the form of US midterm elections," AJ Bell analyst Russ Mould commented.
"The Republicans are widely expected to make sweeping gains and should they control both houses of Congress then Democratic President Joe Biden would essentially be in office but not in power given the divisive nature of politics across the pond. This could be a mixed blessing for markets as gridlock in Washington would at least prevent any legislation being introduced which could damage businesses."
Tuesday's midterms will be key for Biden. Should the Republicans control both the House of Representatives and the Senate, it will make the president's life difficult in the final two years of his term.
Even if Republicans win only the House, that would scupper Biden's legislative agenda and potentially lead to a weakening of US support for Ukraine's resistance against Russia.
Meanwhile, former president Donald Trump may be eyeing a comeback. He said he will make an announcement in Florida on Tuesday next week.
Ahead of the New York open, the Dow Jones Industrial Average was called up 0.2%, the S&P 500 up 0.3% and the Nasdaq Composite up 0.6%. Walt Disney reports quarterly earnings after the closing bell on Tuesday. The stock was up 0.7% in pre-market activity, having added 0.9% on Monday.
The pound was quoted at USD1.1463 midday Tuesday, unbudged from USD1.1459 at the London equities close on Monday. The euro rose to USD0.9998 from USD0.9940. Against the yen, the dollar was trading at JPY146.29, down from JPY146.56.
Eurozone retail sales in September saw their first monthly uptick since May.
According to Eurostat, retail sales in the single currency bloc rose 0.4% in September from August. Sales had been flat on a month-to-month basis in August.
September was the first monthly growth since a 0.2% climb in May. Sales then fell by 1.1% in June and by 0.2% in July.
A reading of the UK retail sector was less promising. UK retail sales slowed in October as retailers brace themselves for consumers opting for pre-owned gifts and strict budgets this Christmas to cope with soaring bills.
On a like-for-like basis, sales grew by 1.2% annually, driven by price increases that masked falling sales volumes as shoppers bought fewer items per visit, British Retail Consortium figures showed. Total sales grew by 1.6% annually. This is below the three-month average of 1.7% and the 12-month average growth of 2.7%.
London-listed shares of retailers were largely higher, however, with investors focusing on the positives for the sector after a mostly positive update from Primark-owner AB Foods.
AB Foods climbed 4.3% after it posted a surge in annual earnings, upped its dividend, and announced a share buyback.
Revenue for the financial year that ended September 17 climbed 22% to GBP17.00 billion from GBP13.88 billion. Pretax profit jumped 48% to GBP1.08 billion from GBP725 million.
AB Foods lifted its payout by 7.9% to 43.7 pence from 40.5p. In addition, it announced a GBP500 million share buyback programme to be completed in the current financial year. The buyback represents 4.7% of the company's issued shares. They will be cancelled after being bought back.
At Primark, annual sales totalled GBP7.7 billion, up 43% at constant currency. "UK like-for-like sales and market shares [are] now broadly in line with pre-Covid levels," AB Foods said.
Next shares rose 1.6% and Superdry added 5.8% in a positive read across.
Joules fell another 3.7%. It had warned on its finances on Monday.
Fellow AIM listing Applied Graphene also issued a caution on its finances, adding that it needs to bolster its coffers soon. Its stock was down 49%.
Responding to media report saying the graphene materials maker is mulling an equity raise, Applied Graphene said now is not a good time to go cap-in-hand to investors. This is due to "unfavourable conditions in small-cap equity markets", it said.
Applied did note its finances are precarious, however. It needs additional funds to extend its cash runway beyond January 31.
Back among London-listed large-caps, Persimmon fell 6.3%.
For the period spanning July 1 and November 7, the housebuilder reported forward sales reserved beyond the current year of GBP770 million, down from GBP1.15 billion a year prior. It also saw a drop in average net private weekly sales rate per outlet, down to 0.60 from 0.78 the previous year.
While Persimmon said it was on track to deliver its full-year volume target guidance of 14,500 to 15,000 homes, it noted that in the last six weeks, cancellation rates have increased to 28% from 21% in the preceding 12 weeks from July 1.
On payouts, Persimmon ruled out a special distribution for 2022, and set out plans for a new capital allocation policy.
"Ordinary dividends will be set at a level that is well covered by post-tax profits, thereby balancing capital retained for investment in the business with those dividends. Any excess capital will be distributed to shareholders from time to time, through a share buyback or special dividend," it said.
Investing back in the business will also be one of the programme's "key principles".
AJ Bell's Mould commented: "Persimmon had no choice but to look at a change to its dividend policy, with the company relying on significant cash reserves to pay the dividend in recent years rather than funding it entirely out of its free cash flow. A double-digit dividend yield was the market ringing the alarm bell over the fate of the dividend and a hefty cut can't be ruled out as Persimmon looks to cut its cloth to fit more straitened circumstances."
Hilton Food tumbled 14% as it warned that full-year profit will be below expectations.
"Hilton Foods' volume and revenue have been in line with the board's expectations, with continued revenue growth compared to the same period last year, although inflationary pressures are providing a headwind," the company said in an "autumn trading update".
Its financial year ends on January 1.
In its UK Seafood arm, Hilton Food said a process to mitigate or pass through rising costs is moving at a "slower pace than anticipated".
"Given the challenges in the UK Seafood business alongside the wider macro-economic environment, the board anticipates that operating profit will now be below its expectations for the full year," Hilton Food warned.
Brent oil was quoted at USD97.24 a barrel, down from USD98.97. Gold was quoted at USD1,672.16 an ounce, down from USD1,678.79.
Over in Paris, Renault shares were down 2.2%. It set out a series of ambitious medium-term financial targets and also announced plans to list its electric vehicle-focused unit Ampere next year.
Ampere will float in the second half of 2023, and Renault will retain a large stake in the unit. It will also receiving backing from "cornerstone investors".
In addition, Renault said it plans to restore its dividend in 2023. The payout will "gradually grow, in a disciplined manner" thereafter.
Among other targets, the company eyes an operating margin above 8% in 2025 and above 10% by 2030. It expects to generate on average EUR2 billion per year in annual free cash flow in the years 2023 to 2025. This figure is forecast to rise to EUR3 billion per year in 2026 to 2030.
By Eric Cunha; ericcunha@alliancenews.com
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