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(Alliance News) - Stocks in London were treading water early Tuesday ahead of a key US inflation reading in the afternoon.
Preventing the FTSE 100 from making much headway was a stronger pound. Expectations for a hefty rate hike from the Bank of England next week firmed following Tuesday morning's labour market update.
In addition, share price losses for grocers, led by Ocado, were weighing on the blue-chip index.
The flagship UK stock index was up 0.050 of a point at 7,473.08 early Tuesday. The mid-cap FTSE 250 index was down 8.40 points at 19,505.47. The AIM All-Share index was up 0.65 points, or 0.1%, at 887.28.
The Cboe UK 100 index was flat at 746.75. The Cboe 250 was down 0.1% at 16,815.97, and the Cboe Small Companies up 0.1% at 13,840.11.
In mainland Europe, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was flat early Tuesday.
At the bottom of the FTSE 100 in early dealings was online grocer Ocado, slumping 12%.
Ocado reported sales growth for Ocado Retail in its third quarter, but warned that shoppers are checking out with smaller baskets and seeking value-for-money items due to the cost-of-living crisis. Ocado Retail is a joint venture between Ocado and Marks & Spencer.
M&S shares were down 3.8%.
For the 13 weeks to August 28, revenue edged up 2.7% to GBP531.5 million, with average orders per week rising 11% to 374,000. Ocado also flagged "record numbers" of new customers. However, the average basket value was down by 6% in the period, with a greater decline experienced later in the quarter.
"Notwithstanding positive customer growth, the accelerating trading down and smaller baskets, particularly over the last few weeks, mean that we now expect to see a small sales decline in FY22 and close to break-even Ebitda," said Ocado. In Ocado's half-year results, it had guided to low single-digit growth at Ocado Retail for the full-year.
These cost-of-living pressures also were highlighted in the latest supermarket industry data from Kantar.
Kantar said that grocery price inflation has hit a new record of 12.4% in August, and there seems "no end in sight".
"Shoppers are taking steps to manage their budgets including broadening the range of stores they visit, with the discount grocers benefiting," said Fraser McKevitt, head of retail and consumer insight at Kantar.
Sales at German discounters Aldi and Lidl soared 19% and 21% respectively in the 12 weeks to September 4, and both gained market share. Sales at Tesco and Sainsbury's both rose, by 1.9% and 1.5% respectively, but this lagged wider industry growth of 3.8%, and both shed market share.
Tesco was the second-worst performer in the FTSE 100 on Tuesday, down 2.4%, and Sainsbury was down 2.2%.
Towards the top of the blue-chips was Premier Inn hotel-owner Whitbread, up 1.7% after JPMorgan placed the hospitality firm on 'positive catalyst watch' into its first-half results, due on October 25.
In the FTSE 250, Future shared rallied 3.0% after saying it expects full-year adjusted operating profit to be at the upper end of market forecasts.
It has placed the analyst consensus range for financial 2022 at GBP266.4 million to GBP270.7 million. In financial 2021, Future reported adjusted operating profit of GBP195.8 million, so profit is guided up at least 36%.
The magazine publisher upgraded guidance after its "encouraging performance" continued. "Operating leverage and cash conversion have remained strong, with continued deleveraging following the acquisition of Who What Wear," it added.
In Asia on Tuesday, the Japanese Nikkei 225 index closed up 0.3%. In China, the Shanghai Composite closed up 0.1%, while the Hang Seng index in Hong Kong was down 0.2%, both stock markets re-opening after Monday's holiday for the Mid-Autumn Festival.
Focus on Tuesday lies on a US inflation reading at 1330 BST.
The consumer price index reading is expected to show the annual inflation rate softening to 8.1% in August from 8.5% in July, according to FXStreet. The figure is being keenly watched ahead of the Federal Reserve's meeting on Thursday next week, when the US central bank is expected to carry out its third consecutive 75 basis point interest rate hike.
The Bank of England was also in focus after data revealed a tighter-than-expected jobs market.
The jobless rate edged down to 3.6% in the three months to July, from 3.8% in the previous three-month period. Market consensus, according to FXStreet, had expected the rate to remain stable at 3.8%.
The latest jobless rate was the lowest since May to July 1974.
Total pay, which includes bonuses, grew 5.5% on-year over the three-month period, ticking up from 5.2% the prior period. Regular pay, which strips out bonuses, grew 5.2%, picking up from 4.7%.
Both figures beat consensus, which had forecast growth of 5.2% and 5.0% respectively.
"What's more, wage growth accelerated faster than expected, hitting 5.5% including bonuses in the three months to July compared with the same period last year. Less labour market slack and faster wage growth increase the odds of a 75 basis point hike from the MPC next week, especially against the backdrop of higher core inflation expectations over the medium term as a result of the new cap on energy bills," said Craig Erlam, senior market analyst at Oanda.
Sterling was quoted at USD1.1720 in the data's wake, rising from USD1.1698 at the London equities close on Monday.
The euro traded at USD1.0147, higher than USD1.0128 late Monday.
Germany's Federal Statistical Office on Tuesday confirmed the country's annual inflation print at 7.9% for August. The reading was up from 7.5% in July, and Destatis noted the inflation rate has remained clearly above 7% for half a year now.
Against the yen, the dollar eased to JPY142.28 from JPY142.35.
Gold was quoted at USD1,724.69 an ounce, lower than USD1,731.11 on Monday. Brent oil was trading at USD94.36 a barrel, down from USD94.63 late Monday.
By Lucy Heming; lucyheming@alliancenews.com
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