HSBC Holdings Share News (HSBA)

(Alliance News) - Inflation fears were weighing on stocks again on Wednesday, as nerves over rising energy prices combined with anticipation ahead of Friday's monthly US jobs report, with fears it will show economic weakness.

The FTSE 100 index was down 126.43 points, or 1.8%, at 6,950.67 midday Wednesday, more than reversing Tuesday's 0.9% rise.

The mid-cap FTSE 250 index was down 460.27 points, or 2.0%, at 22,270.38. The AIM All-Share index was down 19.18 points, or 1.6%, at 1,199.02.

The Cboe UK 100 index was down 1.8% at 690.45. The Cboe 250 was down 2.3% at 20154.73 and the Cboe Small Companies down 0.8% at 15517.43.

In mainland Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt were down 2.1% and 2.25 respectively on Wednesday.

"A continuing surge in energy prices means the spectre of inflation is looming large over the markets again, with the FTSE 100 down more than 1% in early trading," said AJ Bell investment director Russ Mould.

Brent oil was trading at USD82.36 a barrel early Wednesday, a touch lower than USD82.87 late Tuesday but still hovering around three-year highs.

However, Dutch TTF natural gas futures for November - a European benchmark for natural gas prices - spiked on Wednesday to trade around EUR136 per megawatt hour. Meanwhile, UK natural gas futures for November were trading 17% higher around 344p per therm around midday in London - having traded below the 50p mark at the start of 2021.

Both notched record peaks, of EUR162.12 and 407.82p respectively, earlier on Wednesday.

Mould said: "This is undermining the markets' efforts to pick themselves off the canvas after a bruising autumn so far. The next big announcement on the radar is the US jobs report on Friday – a weak number could prompt concern that we are heading for the dreaded stagflation scenario."

Ahead of Friday's US labour market update is the ADP employment report, out at 1315 BST on Wednesday. Consensus, according to FXStreet, sees the ADP jobs figure rising to 428,000 in September from 374,000 in August.

The dollar rose ahead of the ADP figure, lifted by Wednesday's risk-off mood.

Sterling was quoted at USD1.3563 midday Wednesday, falling from USD1.3630 at the London equities close on Tuesday.

The euro traded at USD1.1536, down from USD1.1600 late Tuesday, suffering from a stronger dollar as well as some disappointing eurozone data.

First, German factory orders underwhelmed in August, falling 7.7% month-on-month to reverse a gain of 4.9% in July. August's result undershot consensus, according to FXStreet, for a more moderate decline of 2.1%.

Then, figures showed eurozone retail sales recovered less than hoped in August. In the single currency bloc, retail sales volume rose 0.3% month-on-month, recovering some poise after a 2.6% decline in July. However, analysts had pencilled in a stronger 0.8% increase for August.

Against the safe haven yen, the dollar weakened to JPY111.43 versus JPY111.50.

Fellow safe haven, gold, fared less well. The precious metal was quoted at USD1,751.20 an ounce, soft against USD1,753.55 on Tuesday.

"Although inflation is on the rise and the precious metal is seen as a hedge against rising consumer prices, a reduction in the Fed's stimulus and an uptick in interest rates are going to increase the opportunity cost of holding gold and push its price down," explained Naeem Aslam, chief market analyst at AvaTrade.

Stocks in New York were set for a lower start ahead of the data. The Dow Jones is pointed down 1.0%, the S&P 500 down 1.2% and the Nasdaq Composite down 1.3%.

In London, Melrose Industries - which on Tuesday warned on supply constraints amid a global semiconductor crunch - found itself in the red again, falling 4.8% to the bottom of the FTSE 100 after a 1.1% lower close on Tuesday.

Imperial Brands fell 4.4%, even as it backed full-year guidance. The tobacco firm expects net revenue for the year ended September 30 to grow by around 1% on an organic, constant currency basis, driven by continued strong pricing in tobacco, while adjusted organic operating profit growth is expected to be in line with guidance of low to mid-single digit constant currency growth.

"The tobacco business has performed well although adjusted operating profit will be slightly lower than last year, as previously guided, as a result of the planned increased investment to support our strategic plan as well as lower stock revenue/profit in Australia (around GBP90 million) and US state litigation settlement costs (around GBP50 million)," Imperial explained.

At the top of the FTSE 100 was Tesco, up 4.8% as it hailed the "resilience" of its supply chain in helping to boost interim profit.

Revenue in the six months to August 31 rose 5.9% year-on-year to GBP30.42 billion, from GBP28.72 billion. Tesco's pretax profit more than doubled to GBP1.14 billion from GBP551 million and adjusted retail operating profit rose to GBP1.39 billion from GBP1.19 billion a year before.

The interim performance led the grocer to upgrade its outlook. Tesco now expects full-year adjusted retail operating profit of between GBP2.5 billion and GBP2.6 billion. This would be higher than the GBP1.99 billion achieved last year, as well as above the GBP2.33 billion posted for the pandemic-free 2020 financial year.

As well as upping annual guidance, the supermarket chain unveiled an ongoing share buyback programme, worth GBP500 million in its first tranche which will be carried out until October next year.

Shares in HSBC rose after UBS upgraded the lender to Buy from Neutral.

In the FTSE 250, PageGroup continued to top the index at midday, up 6.6%, as it lifted its outlook again following growth in the third quarter.

For the three months to the end of September, gross profit jumped 65% year-on-year to GBP228.1 million. Compared to 2019, profit was 13% ahead. Gross profit per fee earner was up 21% on 2019.

"Given the magnitude of the impact of Covid-19 on 2020, we are continuing to compare our results to 2019, our record gross profit year," said Chief Executive Steve Ingham.

Despite uncertainty ahead, driven by Covid-19 and supply chain disruption, the FTSE 250-listed firm said its performance in the third quarter has boosted confidence for the full-year. It now expects annual operating profit in the region of GBP155 million, having previously been seen in a range of GBP125 million to GBP135 million.

Shares in fellow recruitment firm Hay rose 1.7%.

IP Group tumbled 7.1% after it announced a raft of changes to its executive team, triggered by the recent successful float of investee business Oxford Nanopore Technologies.

IP Group Chief Executive Alan Aubrey and Chief Investment Officer Mike Townend both will retire from their positions effective immediately. As part of the board shuffle, IP Group announced that Chief Financial Officer Greg Smith will succeed Aubrey as chief executive, while Chief Operating Officer David Baynes will take on responsibility for finance and become chief financial & operating officer.

By Lucy Heming; lucyheming@alliancenews.com

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