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(Alliance News) - Stocks in London are set to pull back on Wednesday after a strong start to the week, with improved sentiment giving way again to worries over rising interest rates and global growth prospects.
"It seems that markets just can't shake off fears of intensive central bank tightening and recession nerves," said Jeffery Halley, senior market analyst at Oanda.
Likely to add more fuel to the concern over central bank moves was data on Wednesday showing UK inflation accelerated as expected in May. The annual inflation rate hit 9.1%, ticking up from 9.0% in April.
This was the highest 12-month inflation rate in the National Statistic series, which began in January 1997, the Office for National Statistics said. Indicative modelled consumer price index inflation estimates suggest that it would last have been higher around 1982.
"Though still at historically high levels, the annual inflation rate was little changed in May. Continued steep food price rises and record high petrol prices were offset by clothing costs rising by less than this time last year and a drop in often fluctuating computer games prices," said Grant Fitzner, chief economist at the ONS.
Sterling was quoted at USD1.2237 early Wednesday, down from USD1.2276 at the London equities close on Tuesday.
IG says futures indicate the FTSE 100 index of large-caps to open down 93.25 points, or 1.3%, at 7,058.80 on Wednesday. The FTSE 100 closed up 30.24 points, or 0.4%, at 7,152.05 on Tuesday.
In the US on Tuesday, Wall Street ended higher, as stocks played catch-up following Monday's holiday. The Dow Jones Industrial Average closed up 2.2%, the S&P 500 up 2.5% and the Nasdaq Composite up 2.5%.
The US economy remains strong, a White House economist asserted Tuesday, while acknowledging President Joe Biden's team is concerned about a possible recession.
Despite a contraction in the first three months of the year, core parts of the world's largest economy remain in good shape, including the labour market and consumer spending, Cecelia Rouse, head of Biden's Council of Economic Advisers said on CNBC.
"When we look at recession [risks]...that's obviously a concern, but the bones of our economy are solid," she said, noting that the US is better positioned to face the challenges than most other nations.
Focus will lie on US Federal Reserve Chair Jerome Powell, who testifies in front of Congress on Wednesday and again on Thursday.
In early company news, the UK government has extended its NatWest stake sell-down under the trading plan unveiled last July.
The trading plan will be extended for a further 12-month term, and will now terminate no later than August 11, 2023. It will continue to be managed by Morgan Stanley.
Since the plan was established, the UK Treasury has sold 703.5 million shares for GBP1.6 billion, it said. This implies an average sale price per share of around 227p, well below the 502p paid to bail out NatWest, then Royal Bank of Scotland, in 2008.
The stock closed on Tuesday at 222.04p. The price is up 9.0% over the past 12 months.
The Treasury currently owns 5.09 billion shares, representing a 48.5% stake. When it set out the trading plan last July, the UK state had a 54.7% stake.
"UKGI and HM Treasury will keep other disposal options open, including by way of directed buybacks and/or accelerated bookbuilds. The decision to extend the trading plan does not preclude HM Treasury from executing such other disposals that achieve value for money for taxpayers, including during the term of the trading plan," the UK government added.
Housebuilder Berkeley said pretax profit for the financial year ended April 30 rose 6.4% to GBP551.5 million from GBP518.1 million, with revenue rising 6.6% to GBP2.35 billion from GBP2.20 billion.
"These strong results reflect the stability of our uniquely long-term operating model throughout an exceptionally volatile period," said Chief Executive Rob Perrins.
Berkeley added it has seen a "stable" start to the new financial year, with enquiries, visitor numbers and reservations in line with the end of the 2022 financial year.
JD Sports Fashion reported a jump in annual revenue and profit, though performance is set to stagnate in the year ahead due to a number of headwinds facing consumers, it said.
Revenue for the 52 weeks to January 29 rose 39% to GBP8.56 billion from GBP6.17 billion the year before, with pretax profit doubling to GBP654.7 million from GBP324.0 million. The athleisurewear retailer will pay a dividend of 0.35p for the year, up from 0.29p the year prior.
"This result demonstrates our capacity for growth in both existing and new markets, and the strength of our global proposition and consumer engagement in store and online," said JD Sports.
Trading in the new financial year has been reassuring so far, it said, with like-for-like sales after four months 5% above a year ago.
"Whilst we are encouraged by the resilient nature of the consumer demand in the current year to date, we remain conscious of the headwinds that prevail at this time including the general global macro-economic and geopolitical situation," JD Sports said, adding that headline profit before tax and exceptional items for the 2023 financial year is seen in line with the record GBP947.2 million just achieved.
On its hunt for a chief executive, JD Sports said a number of "high calibre candidates" are at different stages of consideration. The search for a new non-executive chair is also progressing "at pace".
Frasers Group has increased its stake in German fashion firm Hugo Boss.
The Sports Direct-owner now holds 3.4 million shares of common stock, it said, representing 4.9% of Hugo Boss's share capital, and 18.3 million shares of common stock via the sale of put options, representing a further 26% stake.
"This investment reflects Frasers Group's belief in the Hugo Boss brand, strategy and management team. Frasers Group continues to intend to be a supportive stakeholder and create value in the interests of both Frasers Group's and Hugo Boss' shareholders," said Frasers.
The euro traded at USD1.0502 early Wednesday in London, lower than USD1.0568 late Tuesday. Against the yen, the dollar was quoted at JPY136.54, up versus JPY136.18.
In Asia on Wednesday, the Nikkei 225 index closed down 0.4% in Tokyo. The Shanghai Composite was down 0.9%, and the Hang Seng index in Hong Kong was down 2.0%. The S&P/ASX 200 in Sydney closed down 0.2%.
Gold was quoted at USD1,825.41 an ounce early Wednesday, lower than USD1,839.99 on Tuesday. Brent oil was trading at USD110.29 a barrel, dropping from USD114.71 late Tuesday.
By Lucy Heming; lucyheming@alliancenews.com
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