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(Alliance News) - Upbeat morning trade for European markets gave way to caution by midday on Thursday, as investors look to a make-or-break US inflation reading, and what it could mean for the Federal Reserve interest rate outlook.
The FTSE 100 index was down 5.18 points, 0.1%, at 7,646.58. It had been up around 0.6% earlier on Thursday.
The FTSE 250 was up 70.54 points, 0.4%, at 19,350.62, and the AIM All-Share was up just 0.1 of a point at 749.76.
The Cboe UK 100 was down 0.1% at 764.26, the Cboe UK 250 was up 0.3% at 16,792.05, and the Cboe Small Companies was slightly lower at 13,498.38.
In European equities, the CAC 40 in Paris and the DAX 40 in Frankfurt were each up 0.2%. Both traded off session highs. The CAC had been up 0.7% earlier on Thursday, while the DAX was up 0.9% in morning trade.
After an optimistic morning session, investors were feeling increasingly nervous ahead of the US inflation print for December, due at 1330 GMT.
The data will be critical in informing expectations of how quickly the US Federal Reserve will cut interest rates.
"As always, the devil will be in the detail, and traders will be looking to see how much of the change in the data is driven by core factors and how much relates to volatile items like energy," considered Steve Clayton, head of equity funds, Hargreaves Lansdown.
According to FXStreet, the consensus is for the US headline consumer price inflation rate to edge up to 3.2% annually in December, from 3.1% in November. However, core inflation - which excludes food and energy - is expected to cool to 3.8% from 4.0%.
The dollar was weaker against major currencies in Europe around midday, suggesting traders are pinning their hopes on a benign inflation print.
Sterling was quoted at USD1.2763 at midday in London on Thursday, rising from USD1.2725 at the London equities close on Wednesday. The euro traded at USD1.0978, higher than USD1.0958. Against the yen, the dollar was quoted at JPY145.42, down versus JPY145.74.
Gold was quoted at USD2,033.30 an ounce midday Thursday, higher than USD2,026.60 on Wednesday. The precious metal typically has an inverse relationship with the dollar.
The governor of the Bank of England has said further "global shocks" are a major threat to the UK economy as he told MPs he is monitoring the situation in the Red Sea closely amid concerns over oil supplies.
Andrew Bailey also said he was hoping to see mortgage costs continue to fall after the bank paused hiking interest rates. Bailey said: "We've certainly seen – as best we can tell from the monitoring – shipping traffic is being affected and is being rerouted. That will increase shipping prices and shipping costs.
"I think initially that will be an issue in the monetary policy world."
However, he noted that fortunately been no "prolonged spike" in oil prices as a result.
Brent oil was trading at USD77.88 a barrel midday Thursday, up slightly from USD77.36 on Wednesday afternoon.
The situation in the Red Sea continued to escalate. Armed men in "military-style" uniforms boarded an oil tanker in the Gulf of Oman on Thursday, a maritime risk management company said, the latest in a spate of shipping incidents in the region.
Speaking to the Financial Times, the chief executive of Maersk, the world's second-largest container shipping firm, warned it could take months to reopen the Red Sea route to trade. About 12% of global trade passes through the vital waterway.
Stocks in New York were called to open largely higher. The Dow Jones Industrial Average was called slightly lower, the S&P 500 index up 0.1%, and the Nasdaq Composite up 0.4%.
In the FTSE 100, Whitbread was the top performer, up 3.1%.
It will maintain its guidance for the financial year ending March 31 after posting a jump in its quarterly accommodation sales.
For the 13 weeks to November 30, the Dunstable, Bedfordshire-based owner of the Premier Inn chain of hotels said Premier Inn UK sales grew 11% year-on-year, citing "strong demand" in London and the regions.
Total revenue per available room in the UK rose 9% in the third quarter, and was up 39% from the largely pandemic-free financial 2020, due to "high occupancy and strong pricing". UK food and beverage sales also performed well, with sales rising by 6%.
Tesco returned the morning's gains, slipping into the red, down 0.5%.
The comes despite the grocer raising annual guidance, and reporting strong growth in sales and market share over the Christmas period.
Marks & Spencer dropped 5.2%, with investors unnerved by warnings of higher costs ahead.
It reported sustained "strong sales momentum" over the festive trading period in its financial third quarter, the 13 weeks to December 30.
Group sales rose 7.2% to GBP3.86 billion year-on-year in constant currency, with Food leading the way with a 10% rise, and Clothing & Home seeing 4.8% growth. It resulted in total UK growth of 8.5%.
Looking ahead, M&S said it was confident of annual results in line with market expectations. However, it pointed to uncertainty in terms of economic growth, and consumer and geopolitical risks. It also faces higher costs from the higher-than-expected wage and business rate cost inflation.
"Shares in Marks & Spencer rallied in the days before the results as investors looked at strong updates from Aldi and Lidl, plus a resilient showing from Next, and concluded that M&S could also do well," said AJ Bell investment director Russ Mould.
"The shares have given back some of those gains on the trading update as investors with a 'better to travel than arrive' mindset bank some profits. There are also enough words of caution in the update to stall momentum in the share price," he added.
In the FTSE 250, Trustpilot jumped 17% amid strong trading, and the announcement of a new GBP20 million share buyback.
Darktrace added 7.9%. The Cambridge, England-headquartered cybersecurity company reported double-digit revenue growth over its first half, and raised its targets for its full financial year.
On AIM, Windward jumped 19%, after announcing it expects 2023 results to be ahead of market expectations.
The Tel Aviv, Israel-based maritime predictive intelligence company said it expects revenue of USD28.3 million, surpassing market consensus of USD26.6 million. This would also be a 31% increase from USD21.6 million in 2022.
Windward also expects its adjusted loss before interest, tax, depreciation and amortisation to narrow to USD5.1 million from USD12.1 million a year ago. Market expectations for its adjusted Ebitda loss were USD7.0 million.
The company cited strong growth in customer numbers, which exceeded 200 at December 31, compared to 132 in 2022. As a result, Windward's annual contract value at the end of 2023 totalled USD34.5 million, up 35% year-on-year.
Aside from the US inflation data, there is the latest initial jobless claims reading, also at 1330 GMT.
By Elizabeth Winter, Alliance News deputy news editor
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