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(Alliance News) - European equities declined on Tuesday, with a bullish reading of the US services sector at the start of the week knocking investor confidence and possibly muddying the picture for the US Federal Reserve.
The FTSE 100 index ended down 46.15 points, or 0.6%, at 7,521.39 on Tuesday in London. The blue-chip index advanced 6.7% last month, but December is proving to be trickier for equities. The FTSE has lost 0.7% so far this month.
The FTSE 250 closed down 229.50 points, or 1.2%, at 19,100.08. The AIM All-Share closed down 10.53 points, or 1.2%, at 840.19.
The Cboe UK 100 lost 0.5% at 753.60, the Cboe UK 250 ended down 1.1% at 16,540.31, and the Cboe Small Companies shed 0.1% at 13,073.73.
In European equities on Tuesday, the CAC 40 in Paris fell 0.1%, while the DAX 40 in Frankfurt lost a heftier 0.7%.
At the time of the European close, stocks in New York were also lower. The Dow Jones Industrial Average was down 0.8%, the S&P 500 was 1.1% lower and the Nasdaq Composite shed 1.4%.
"The strength of the ISM report appears to have upset the conventional wisdom that inflation might come down quite quickly, given the resilience of the numbers, as well as the rebound in wages growth seen in Friday's payrolls report," CMC Markets analyst Michael Hewson commented.
The Fed meets next week, concluding its two-day policy meeting with an interest rate decision on Wednesday. While Chair Jerome Powell got equity market hopes up by saying the central bank may put the brakes on the monetary policy tightening pedal, Monday's services data and Friday's nonfarms print suggested the Fed may keep rates higher for longer.
The Institute for Supply Management's tracker picked up, figures on Monday showed.
ISM's services PMI rose to 56.5 points last month, from 54.4 in October. November's reading came in ahead of the consensus of 53.1 points.
All eyes will be on whether the data, and Friday's hot US jobs report, forces the Fed to enact another supersized rate hike.
Analysts at Deutsche Bank think it is unlikely that the Fed will "quibble" after the "quirky jobs report".
"While we always caution against reading too much into one particular payroll report, the November release may warrant an extra grain of salt," analysts at the German bank said.
The pound was quoted at USD1.2243 late on Tuesday in London, up from USD1.2189 at the London equities close on Monday. The euro stood at USD1.0519, up slightly against USD1.0515 late Monday. Against the yen, the dollar was trading at JPY136.46, marginally higher from JPY136.42.
In London, Phoenix Group rose 2.6%, among the best FTSE 100 performers. The insurance services provider said it expects to achieve strong organic growth in 2022, with GBP1.2 billion of new business to be delivered in the year.
Phoenix said its GBP1.2 billion long-term cash generation comprises around GBP900 million from its Retirement Solutions business, and GBP300 million from its Pensions & Savings, Europe and SunLife businesses.
Mining stocks weakened on Tuesday, returning gains from Monday and hitting the FTSE 100.
Advances from the likes of Glencore and Anglo American had shielded the FTSE 100 from the declines seen from European blue-chip index peers on Monday. Glencore and Anglo fell 1.0% and 0.4% on Tuesday, however.
Also putting pressure on the FTSE 100 were bearish broker updates.
Mondi dropped 4.7%. It was the worst blue-chip performer after Credit Suisse cut the paper and packaging firm firm to 'underperform' from 'outperform'.
Utility stocks Pennon, United Utilities and Severn Trent were also lower, ending down 1.7%, 1.9% and 1.5%, respectively. They were placed on 'negative catalyst watch' by Jefferies.
Elsewhere in London, Paragon Banking added 4.7%. For the financial year that ended on September 30, the Solihull, England-based lender and savings bank said pretax profit nearly doubled to GBP417.9 million from GBP213.7 million the year before.
The bank raised its total dividend by 9.6% to 28.6 pence per share, from 26.1p.
Looking ahead, Paragon noted the current volatile operating environment and the cost of living increases, while hailing the "swift" reaction capabilities of its business in the face of a changing environment.
On AIM, Oxford Metrics added 12% as it reported weaker annual earnings, but said it believes supply chain pressures are abating.
The software company said pretax profit in the financial year that ended September 30 was GBP2.7 million, down 25% from GBP3.6 million a year earlier. Revenue was up 4.5% to GBP28.8 million from GBP27.6 million.
"We enter a new financial year with our largest ever set of orders-in-hand and demand for our systems remains buoyant," Chief Executive Nick Bolton said.
Oxford Metrics added that "demand remains strong and we believe supply chain constraints are gradually easing".
Ferguson rose 2.9%. The plumbing and heating products supplier said pretax profit for the three months that ended October 31 rose 11% to USD792 million from USD711 million a year prior.
Net sales also grew, up 17% to USD7.93 billion from USD6.08 billion the previous year.
Looking ahead, Ferguson's guidance for the financial year remains unchanged. It expects adjusted operating margin of 9.3% to 9.9%.
Gold was priced at USD1,774.71 an ounce at the time of the London equities close on Tuesday, down slightly from USD1,776.79 late Monday. Brent oil was quoted at USD80.35 a barrel, lower against USD84.95.
Wednesday's economic calendar has a Halifax UK house price index reading at 0700 GMT, and a eurozone gross domestic product reading at 1000 GMT.
The local corporate calendar has annual results from pub firm Mitchells & Butlers and a half-year report from greetings card seller Moonpig.
By Eric Cunha, Alliance News news editor
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