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(Alliance News) - European stocks opened mixed on Wednesday, but the FTSE 100 managed a minor gain despite a stronger pound on the back of a red-hot UK inflation reading.
The FTSE 100 index traded up just 3.46 points at 8,784.58. It had fallen immediately after the opening bell, but grew in confidence towards the end of the first hour of trading.
The FTSE 250 was down 90.31 points, 0.4%, at 21,006.13, and the AIM All-Share was down 1.42 points, 0.2%, at 736.16.
The Cboe UK 100 was flat at 876.48, the Cboe UK 250 was 0.2% lower at 18,416.79, and the Cboe Small Companies was 0.9% higher at 16,384.27.
In Paris, the CAC 40 fell 0.4%, while Frankfurt's DAX 40 lost 0.1%.
Against the dollar, sterling shot up to USD1.3412 on Wednesday morning, from USD1.3363 at the time of the London equities close on Tuesday. The euro climbed to USD1.1327 from USD1.1258. Against the yen, the dollar fell to JPY143.92 from JPY144.62.
The pace of annual consumer price inflation accelerated to 3.5% in April, from 2.6% in March, topping the FXStreet cited consensus of 3.3%. The last time the rate of inflation was higher was back in January 2024, when it stood at 4.0%.
On a monthly basis, consumer prices shot up 1.2% in April, after a 0.3% hike in March.
Service price inflation picked up to 5.4% in April, from 4.7% in March.
Excluding energy, food, alcohol and tobacco, the annual core consumer price inflation rate was 3.8% in April, quickening from 3.4% in March.
deVere analyst Nigel Green commented: "The pound's reaction was swift—a clear signal that markets are reassessing UK risk exposure in light of the data."
The Bank of England has been cutting interest rates too quickly, its chief economist warned Tuesday.
Huw Pill said the pace of interest rate reductions since August last year has been "too rapid" given the balance of risks to UK inflation.
Ebury analyst Matthew Ryan commented: "Today's data should put pay to the possibility of another UK rate cut for a few months, and will likely encourage the Bank of England to maintain its hawkish policy guidance for some time yet.
"The fresh bounce in services inflation, which is now running well above estimates, will be particularly worrisome for the MPC, and policymakers will need to see far more progress here to be confident in achieving the 2% target anytime soon. Indeed, swap markets are now not fully pricing in the next 25bp cut until as far out as the bank's November meeting."
Housebuilders in London struggled on the back of the data. Barratt Redrow fell 2.3%, while Taylor Wimpey shed 1.7%.
The yield on the 10-year Treasury stretched to 4.52% on Wednesday morning UK time, from 4.48% at the time of the London equities close on Tuesday. The 30-year yield widened to 5.01% from 4.97%.
In Tokyo on Wednesday, the Nikkei 225 fell 0.6%. In China, the Shanghai Composite added 0.2%. The Hang Seng Index in Hong Kong rose 0.5%. In Sydney, the S&P/ASX 200 added 0.5%.
Gold traded at USD3,312.64 an ounce early Wednesday, up from USD3,276.82 late Tuesday afternoon. Brent rallied to USD66.02 from USD65.09.
In London, M&S shares fell 2.3%. It warned of a GBP300 million to hit to profit in its new financial year following a cyber incident, marring annual earnings. Revenue rose for the year to March 29, and profit did too, when removing an impairment charge recognised in relation to the value of the investment in Ocado Retail.
M&S said it entered the new year "with both Food and Fashion, Home & Beauty trading ahead of budget", prior to the cyber incident.
M&S said: "Since the incident, Food sales have been impacted by reduced availability, although this is already improving. We have also incurred additional waste and logistics costs, due to the need to operate manual processes, impacting profit in the first quarter. In Fashion, Home & Beauty, online sales and trading profit have been heavily impacted by the necessary decision to pause online shopping, however stores have remained resilient. We expect online disruption to continue throughout June and into July as we restart, then ramp up operations. This will also mean increased stock management costs in the second quarter."
It expects a roughly GBP300 million to operating profit this year stemming from the incident, before that figure is reduced by "management of costs, insurance and other trading actions".
JD Sports reported an increase in annual revenue but a decline in profit for the year to February 1.
It said sales in the 13 weeks to May 3 rose 3.1% on an organic basis. However, they were down 2.0% like-for-like.
CEO Regis Schultz said: "Overall trading in the first quarter of the new financial year has been in line with our expectations in a volatile market. Despite this volatility, and uncertainty surrounding the impact of US tariff changes, we look forward into the medium term with confidence that we can continue to outperform the market, improve our profit margin and create significant value for our shareholders."
The stock fell 6.0%.
Elsewhere in London, Shoe Zone slumped 16%. It swung to a pretax loss of GBP2.3 million in the 26 weeks to March 29, from profit of GBP2.6 million. Revenue declined 6.5% to GBP71.5 million from GBP76.5 million.
Shoe Zone said: "Our original full year profit before tax forecast was GBP10.0 million, which was revised down to GBP5.0 million. This reduction was due to the challenging trading conditions we experienced, particularly in the first quarter of this financial year, due to weak consumer confidence and unseasonal weather conditions. As a result of the changes announced in the October 2024 budget, we will also incur additional national insurance and national living wage costs in the second half of this financial year.
"The second quarter has shown improvement, but the trading environment continues to be difficult as consumer confidence continues to be low. During the second quarter, we have seen more stability/reduction in the price of containers, and a strengthening of sterling against the dollar, both of which will start to benefit in the second half of this financial year."
By Eric Cunha, Alliance News news editor
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