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(Alliance News) - The FTSE 100 struggled to maintain its opening gain at midday on Tuesday, while investor sentiment in Europe took a bashing from another hot inflation reading.
Eurozone consumer price inflation is expected to be 8.1% in May, accelerating from 7.4% annually in April, according to the latest flash estimate from Eurostat, the statistical office of the EU.
Energy is expected to have the highest annual rate in May, at 39.2%, compared with 37.5% in April. This is followed by food, alcohol & tobacco at 7.5%, compared with 6.3% in April, and non-energy industrial goods at 4.2%, compared with 3.8% in April.
The FTSE 100 index was up 26.57 points, or 0.4%, at 7,626.63 midday Tuesday. The mid-cap FTSE 250 index was down 81.10 points, or 0.4%, at 20,464.79. The AIM All-Share index was up 1.05 points, or 0.1%, at 975.26.
The Cboe UK 100 index was up 0.3% at 759.46. The Cboe 250 was down 0.4% at 18,151.48 and the Cboe Small Companies was 0.8% lower at 14,627.69.
In mainland Europe, the CAC 40 in Paris was down 1.0% and the DAX 40 in Frankfurt lost 0.8%.
"European stock investors have been discouraged by the recent inflation report from France and Germany where historical surges have been registered, echoing the global concern about how central banks should act to tame the pressure brought by rising prices without putting economic growth in danger," Pierre Veyret, technical analyst at ActivTrades, said.
Adding to the pressure, the French economy shrank in the first quarter as households spent even less than previously thought due to rising inflation, the statistics agency said, lowering an initial estimate of zero growth.
Prior to the war in Ukraine, France's INSEE statistics agency had expected the French economy to grow in the first quarter after improving sharply last year. Last month it estimated that the economy had flatlined, but its new calculations showed that France's GDP contracted by 0.2% in the first three months of the year.
Brent oil was priced at USD119.35 a barrel midday Tuesday in London, down from USD120.20 at the London equities close on Monday, and pulling back from over USD124 seen earlier this morning.
EU leaders agreed late Monday to ban more than two-thirds of Russian oil imports, tightening economic screws on the country even as Moscow's forces made gains in the eastern Donbas region of war-ravaged Ukraine.
The compromise deal, meant to punish Russia for its invasion three months ago, cuts "a huge source of financing for its war machine", European Council chief Charles Michel tweeted.
Victoria Scholar, head of Investment at interactive investor said: "Oil prices are extending gains with Brent crude at fresh two-month highs after European Union leaders agreed to ban 90% of Russian oil imports by year-end. Oil and petroleum products are included, but there is a temporary exception of crude sent via pipeline to Hungary, Slovakia and the Czech Republic, thereby resolving the deadlock with Hungary.
"Price action looks set to build on existing bullish momentum driven by an exacerbation of the imbalance between supply and demand after the EU's Russian oil ban combined with China's easing covid restrictions supporting demand and OPEC+ this week which looks set to stick to its guns rather than succumb to Western demands for the release of further output."
Gold stood at USD1,849.70 an ounce, down from USD1,857.80 late Monday.
In London, Unilever advanced 5.3%, racing to the top of the FTSE 100. It has appointed activist investor Nelson Peltz to board, starting July 20. Peltz is chief executive officer and a founding partner of Trian Fund Management, whose funds now have a 1.5% stake in Unilever.
AJ Bell investment director Russ Mould said: "Unilever has given in to the pressure and handed activist investor Nelson Peltz a seat on its board. The consumer goods firm has been struggling in the wake of the failed takeover of GSK Consumer Health, and investors have welcomed the move warmly.
"Inviting Peltz in is only likely to ramp up the pressure on beleaguered CEO Alan Jope, and we may now see the company advance plans to streamline the business and address governance concerns."
At the other end of the FTSE 100 index, B&M European Value Retail fell 11%, with a worrying outlook spooking investors.
The retailer promoted its current chief financial officer to take over from departing Chief Executive Simon Arora. CFO Alex Russo will succeed Arora in "due course", B&M said.
Turning to its results, B&M reported flat annual profit despite a decline in revenue.
For the 52 weeks ended March 26, pretax profit was stable at GBP525 million, while revenue slipped to GBP4.67 billion from GBP4.80 billion the year prior.
B&M recommended a final dividend of 11.5 pence, cut 12% from the 13.0p final payout offered last year.
The company noted: "Notwithstanding the many and varied uncertainties and headwinds which are likely to impact on our trading performance during [the next financial year], at this early stage in the year group adjusted Ebitda is expected to be in the range of GBP550 million to GBP600 million, significantly ahead of the [financial 2020] pre-pandemic level of GBP342 million."
Adjusted Ebitda in financial 2022 came in at GBP619 million.
ii's Scholar said: "Shares in B&M have fallen sharply this morning with investors spooked by its profit margin warning for the year. The shares are down by around 35% since the December peak as the cost-of-living crisis, spiralling inflation, and the departure of its long-term respected CEO.
"However, as value for money becomes increasingly important for the consumer and with the government's generous GBP15 billion support package perhaps B&M is well positioned to fare better than others amid the challenging affordability environment."
Among London midcaps, Pennon shares lost 1.9%.
The Exeter, England-based water utility posted lower annual profit despite growing revenue, as higher interest rates and soaring power costs hurt the bottom-line.
In the year that ended March 31, pretax profit dropped 3.3% to GBP127.7 million from GBP132.1 million a year ago, in line with internal expectations.
Underlying earnings before interest, tax, depreciation and amortisation however, rose to GBP383.9 million from GBP334.7 million, up 15%. Those earnings were "more than offset by increased interest charges on index-linked debt", Pennon said.
AJ Bell's Mould noted: "This somewhat undermines the company's appeal as a way for investors to protect themselves against rising prices."
Revenue climbed 23% to GBP792.3 million from GBP644.7 million. Revenue growth was driven by non-household demand and contract wins by Pennon Water Services Ltd, the company explained.
Pennon proposed a final dividend of 26.83 pence per share, up 9.6% from 24.46p a year ago. For the full financial year, it amounts to a dividend of 38.53p per share, up 8.2% from 35.61p a year ago.
Looking ahead to the US open, there is a lack of optimism from investors returning from a long holiday weekend. The Dow Jones Industrial Average was called down 0.6%, the S&P 500 down 0.7%, and the Nasdaq Composite down 0.4%r.
The pound was quoted at USD1.2600 midday Tuesday in London, falling from USD1.2640 at the London equities close on Monday.
The euro stood at USD1.0731, soft from USD1.0780. Against the yen, the dollar was trading at JPY127.98, firm on JPY127.60.
By Paul McGowan; paulmcgowan@alliancenews.com
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