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(Alliance News) - Stocks in London tilted slightly higher on Wednesday morning, with worrying manufacturing PMI readings in Asia giving investors pause, as did the looming spectre of rising interest rates.
"Comments from a Federal Reserve member...underlined the pressure, with a suggestion that interest rate rises could continue until there is a significant reduction in inflation. This introduced some doubt as to whether the Fed would pause its hiking cycle after the expected rises in June and July as had previously been hoped," Richard Hunter, head of Markets at interactive investor, said:
The FTSE 100 index was up just 1.17 points at 7,608.83 early Wednesday. The mid-cap FTSE 250 index was up 46.19 points, or 0.2%, at 20,464.14. The AIM All-Share index was down 2.06 points, or 0.2%, at 973.68.
The Cboe UK 100 index was up 0.2% at 757.74. The Cboe 250 was up 0.4% at 18,136.62 and the Cboe Small Companies was slightly lower at 14,615.84.
In mainland Europe, the CAC 40 in Paris was up 0.4% and the DAX 40 in Frankfurt advanced 0.5%.
House prices in the UK recorded another double-digit percentage increase in May, according to the latest Nationwide house price index, but the growth has slowed from April.
House prices were 11% higher in May than a year earlier, slowing from April's 12% rise in average property value.
Prices also increased by 0.9% month on month in May, accelerating from the 0.4% rise reported in April.
Robert Gardner, Nationwide's chief economist, said: "Despite growing headwinds from the squeeze on household budgets due to high inflation and a steady increase in borrowing costs, the housing market has retained a surprising amount of momentum.
"Demand is being supported by strong labour market conditions, where the unemployment rate has fallen towards 50-year lows, and with the number of job vacancies at a record high. At the same time, the stock of homes on the market has remained low, keeping upward pressure on house prices."
Housebuilders Berkeley, Taylor Wimpey, Barratt Development and Persimmon were up 1.7%, 1.4%, 1.2% and 0.9%, respectively, in early trading.
In London, Vodafone, National Grid and Severn Trent was anchored to the bottom of the FTSE 100, as all three stocks went ex-dividend. Vodafone was down 3.2%, National Grid 3.1%, and Severn Trent 1.9%.
Among midcaps, Dr Martens was the best performer, jumping 20%, after the footwear and clothing company posted annual earnings ahead of market expectations, aided by the reopening of stores as Covid restrictions eased, and has guided for continued strong sales growth.
For the year ended March 31, pretax profit surged to GBP214.3 million from GBP69.7 million the year prior. Revenue rose to GBP908.3 million from GBP773.0 million.
The retailer declared an annual dividend of 5.5 pence, compared to none the year before.
"Today's strong results have been driven by our proven [direct to consumer]-first strategy and continue to build upon our track record of volume-led growth. When we listed, we committed to deliver high-teens revenue growth, and today we are pleased to report 22% constant currency growth and Ebitda ahead of market expectations. Our results were achieved against unprecedented Covid-19 disruption in our supply chain, which our teams navigated with flexibility and dedication," Chief Executive Kenny Wilson said.
Looking to financial 2023, Dr Martens guided for revenue growth in the high-teens.
John Wood advanced 1.6%. The Aberdeen-based engineering and consulting firm agreed to sell its Built Environment Consulting business to WSP Global for about USD1.9 billion gross.
Chief Executive Robin Watson said: "We are very pleased to have agreed this sale with WSP. This transaction will deliver significant value for our shareholders and marks a new chapter for Wood. It enables us to move onto our next strategic phase with the financial flexibility to accelerate our strategy to capture the growth opportunities ahead across both energy security and sustainability."
The sale is expected to complete in the second half of 2022.
John Wood said it will use the proceeds from the sale to reduce its debt and strengthen its balance sheet. The firm ended 2021 with net debt of about USD1.4 billion. It expects now to be in a net cash position.
In Tokyo on Wednesday, the Nikkei 225 closed up 0.7%. The Shanghai Composite was down 0.3%, while the Hang Seng in Hong Kong was 0.6% lower. The S&P/ASX 200 ended 0.3% higher.
Brent oil quoted at USD117.02 a barrel early Wednesday in London, down sharply from USD123.75 late Tuesday, but was clawing back some losses as it was seen around USD115 before the London equities market opened. Gold stood at USD1,834.80 an ounce, down from USD1,845.51.
The pound was quoted at USD1.2604 early Wednesday in London, down slightly from USD1.2605 at the London equities close on Tuesday. The euro stood at USD1.0730, firm from USD1.0722.
Against the yen, the dollar was trading at JPY129.47, higher on JPY128.50.
The economic events calendar on Wednesday has manufacturing PMI readings from the eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST.
CMC Markets analyst Michael Hewson said: "As we get a new month underway, we already know that the economic growth in Europe and the UK is slowing due to rising prices, and supply chain disruptions caused by the Russian invasion of Ukraine and Covid lockdowns in China.
"Today's manufacturing PMIs for May, while expected to be weaker, don't really reflect the disruptions being faced by the manufacturing sector across Europe."
There is a Bank of Canada interest rate decision at 1500 BST.
By Paul McGowan; paulmcgowan@alliancenews.com
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