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(Alliance News) - London was set for sour open on Wednesday following a tech sell-off in Wall Street on Tuesday, while investors await the latest consumer price index reading from the US.
"Today's main focus revolves around the question as to whether we are near peak US CPI, as markets gear up for the potential for a significant move in the event of a miss either side of the headline number," CMC Markets analyst Michael Hewson said.
In early corporate news in the UK, Prudential saw new business hit by rising rates. Aviva's combined ratio and higher sales lifted profit. RS Group has bought in Mexico.
IG futures indicate the FTSE 100 will open down 15.75 points, or 0.2%, at 7,472.40 on Wednesday. The index closed up 5.78 points, or 0.1%, at 7,488.15 on Tuesday.
In Asia on Wednesday, the Nikkei 225 index in Tokyo closed down 0.7%. In China, the Shanghai Composite lost 0.6%, while the Hang Seng index in Hong Kong was 2.5% lower in late trade. The S&P/ASX 200 in Sydney ended down 0.5%.
On Tuesday, the Dow Jones Industrial Average closed down 0.2%, the S&P 500 index down 0.4%, and the Nasdaq Composite down 1.2%.
The tech-heavy Nasdaq suffered from a revenue warning from computer-chip maker Micron Technologies, which itself shed 3.7%. Micron said fourth-quarter revenue "may come in at or below the low end" of guidance.
Micron's dim outlook followed larger peer Nvidia's similar warning on Monday.
In New York, all eyes will be on the inflation print due before the open on Wall Street. The reading is at 1330 BST.
Consensus, according to FXStreet, expects the US annual consumer price inflation rate to have eased to 8.7% in July from 9.1% in June. The core rate, however, is seen ticking up to 6.1% from 5.9%.
In Germany, official data from Destatis showed the annual inflation rate was slightly down again, slipping to 7.5% in July 2022
In June, the inflation rate had stood at 7.6% and at 7.9% in May 2022.
On the previous month, consumer inflation was 0.9% in July.
If inflation continues to march higher, central banks could be forced to continue to hike interest rates aggressively.
Ahead of the US CPI report, the CME's FedWatch tool places the chance of a third 75-basis-point interest rate hike by the Federal Reserve at 68%, having stood at 41% a week before and 31% a month ago. A smaller 50 basis point hike is now the minority opinion, priced in by just a third of analysts, down from two-thirds a month ago.
"Speculation about a 100bps rate move in July didn't last very long as two of the most hawkish members of the FOMC, Waller and Bullard pushed back against the idea, saying that they felt that 75bps was sufficient, however a similarly strong number today could prompt similar speculation about 100bps at the September meeting," CMC's Hewson said.
"Since those June [CPI] numbers were released, the debate has moved on a touch with concerns over a recession now getting equal weighting to concern over aggressive central bank tightening."
Among London stocks, insurer Prudential was pleased with its "resilient" performance in the first half, but new business profit was held back by rising interest rates in Hong Kong. Prudential has a large business in Asia.
In the six months to June 30, attributable pretax profit slumped to USD300 million from USD1.26 billion. However, adjusted operating pretax profit rose 5.7% to USD1.66 billion from USD1.57 billion.
Pru noted it booked a negative USD1.38 billion "short-term fluctuation" in investment returns, which is much worse than the negative USD212 million seen a year prior.
Annual premium equivalent sales rose to USD2.21 billion from USD2.08 billion.
New business profit slipped to USD1.10 billion from USD1.18 billion, which Pru put down to higher interest rates and differences in geographical and channel mix.
Interim Chief Executive Mark FitzPatrick said: "Our resilient operational performance demonstrates the strength of our well positioned and well diversified franchise across the Asia region, driven by our multi-channel, digitally enhanced distribution platform."
Anil Wadhwani will take over as CEO of Prudential in February next year.
Pru declared an interim dividend of 5.74 US cents, up 7% year-on-year and equal to one-third of its previous full-year dividend of 17.23 cents per share.
Peer Aviva reported an "excellent" first half and is confident of meeting its annual targets.
In the six months to June 30, its IFRS loss widened to GBP633 million from a GBP198 million loss a year prior. Adjusted operating profit rose to GBP829 million from GBP725 million.
Annuities & equity sales increased 12% to GBP2.76 billion from GBP2.47 billion.
Aviva's General Insurance gross written premiums rose 6% to GBP4.69 billion from GBP4.37 billion. Its combined operating ratio worsened to 94.0% from 91.6%, however.
New business sales in Life unit were up 3% to GBP17.4 billion from GBP16.9 billion.
Its Solvency II cover ratio fell to 234% from 244%.
Aviva declared an interim dividend of 10.3p, rising 40% from 7.35p a year earlier.
"Overall, Aviva is in excellent health and our strategy is delivering results. We enter the second half of 2022 with confidence and while we remain mindful of market and macro-economic challenges, we are on track to meet all of our financial targets," Chief Executive Amanda Blanc said.
Industrial and electronic products distributor RS Group has acquired Mexican Risoul y Cia SA for USD275 million cash.
RS Group, formerly known as Electrocomponents, said the deal for the distributor of industrial and automation products "significantly strengthens" its position in Mexico.
"We are excited about deepening our presence in Mexico and having a strong platform to expand into Latin America, a region we can see benefiting from nearshoring owing to de-globalisation and a greater focus on improving sustainability through reducing distances products travel," RS added.
TP ICAP saw revenue grow across its asset classes in the first half, leading to a nice bump in dividend.
In the first half of 2022, pretax profit more than doubled to GBP72 million from GBP28 million.
Revenue rose to GBP1.08 billion from GBP936 million, led by a strong performance in Rates. Global broking revenue was up 8%, with TP ICAP saying all asset classes generated revenue uplift.
Global broking revenue per broker increased 14%.
TP ICAP upped its dividend by 13% to 4.5p from 4.0p.
"Despite the uncertain backdrop, we are cautiously optimistic for the remainder of the year and we are well positioned," the interdealer broker added.
The pound was quoted at USD1.2070 early Wednesday, down from USD1.2086 at the London equities close Tuesday
The euro stood at USD1.0205, down from USD1.0223 at the European equities close Tuesday. Against the yen, the dollar was trading at JPY135.05, up from JPY134.96 late Tuesday.
Gold was quoted at USD1,788.10 early Wednesday, falling from USD1,793.82 an ounce at the London equities close Tuesday.
Brent oil was quoted at USD95.37 a barrel, down from USD97.62 a barrel at the London equities close Tuesday.
Oil prices underwent a sell-off overnight after topping out at USD98 on Tuesday afternoon in London after the supply of Russian oil to three European countries through Ukraine was halted. Russian firm Transneft said the Ukrainian side stopped the oil transport "due to not receiving funds for these services".
However, deliveries to Poland and Germany via Belarus were continuing "as usual", Transneft added.
By Paul McGowan; paulmcgowan@alliancenews.com
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