LONDON MARKET CLOSE: End Of Eight-Day Rally Despite Higher Oil Prices

LONDON (Alliance News) - Stocks in London ended lower, with both the FTSE 100 and the FTSE 250 snapping a rally of eight consecutive sessions higher, despite the continued recovery in crude prices and a good performance from miners and oil producers.

The pound retained the gains it made against the dollar, after data showed UK inflation increased in July to the highest level since November 2014, above economists expectations, while the same from the US came in flat, in line with consensus.

The FTSE 100 ended down 0.7%, or 47.27 points, at 6,893.92. The FTSE 250 also fell 0.7%, or 120.77 points, at 17.808.50, and the AIM All-Share dropped 0.2%, or 1.16 points, at 783.50.

Data from the Office for National Statistics showed that UK consumer prices climbed 0.6% year-on-year in July, following a 0.5% rise in June. Economists had forecast inflation to remain stable at 0.5%. Month-on-month, UK consumer prices dropped 0.1%, as expected, which was the first fall in six months. In June, prices had gained 0.2%.

UK Core inflation, that excludes energy, food, alcoholic beverages and tobacco, slowed slightly to 1.3% in July from 1.4% in June, in line with economists expectations.

Sterling stood at USD1.2938 before the inflation data, but gained some ground against the dollar after the UK inflation data, quoted at USD1.3000 at the London equities close. Nevertheless, the UK currency touched a low of USD1.2864 on Monday, near the 31-year lows reached in July, when the results of the EU referendum were still fresh.

Meanwhile, the US Labor Department revealed that US consumer prices were unchanged month-on-month in July, in line with economists expectations, following an increase of 0.2% in June. On a yearly basis, US consumer prices rose 0.8% in July, slower than the 1.0% seen in June and the expected 0.9% increase. US Core prices ticked up by 0.1% in July, but it was below expectations of a flat reading from the 0.2% rise seen in June.

Federal Reserve Bank of New York President William Dudley indicated on Tuesday that the US economy has evolved in a good shape that could justify an interest rate hike as early as next month. Many market participants, though, have been saying of late that the Fed will not increase interest rates for the remainder of the year.

"We are edging closer toward the point in time where I think it will be appropriate to raise interest rates further," Dudley told Fox Business Network. Dudley added that the US presidential election, on November 8, is no factor in the timing of a potential rate hike.

"Interestingly, on the day when the Fed's Dudley has sought to raise market expectations of a rate rise in September, we have also seen the dollar lose ground across the board, with markets largely disregarding the notion that a hike will come next month," said IG analyst Joshua Mahony.

The minutes of the last Fed's Federal Open Market Committee of July 27 are scheduled to be released on Wednesday at 1900 BST.

In New York at the European equities close, stocks were down, having closed at record highs on Monday. The Dow 30 index was down 0.3%, the S&P 500 down 0.4%, and the Nasdaq Composite down 0.5%.

In mainland Europe, the CAC 40 index in Paris fell 0.8%, while the DAX 30 in Frankfurt ended 0.6% lower. The euro was quoted at USD1.1279 at the equities close, compared to USD1.1194 at the same time on Monday.

Gold was quoted at USD1,349.30 an ounce at the close, higher than the USD1,341.60 an ounce seen on Monday. Meanwhile, oil prices continued their way up on the back of continued rumours about a freeze in output. Brent oil was eyeing the USD49 line, quoted at USD48.83 a barrel at the equities close, higher than the USD48.06 a barrel seen on Monday.

This supported Royal Dutch Shell 'A' shares, up 1.0%, while BP rose 0.2%. In the FTSE 250, Cairn Energy rose 4.9%, while AMEC Foster Wheeler added 3.7%.

Miners limited the losses, with the FTSE 350 Mining sector index up 1.6%, and Antofagasta leading the gainers, 6.7% higher. The Chilean copper miner reaffirmed its production guidance, but said output is likely to be at the lower end of the range.

Antofagasta said revenue dropped to USD1.44 billion in the first six months of the year from USD1.77 billion a year earlier on the back of lower copper prices and sales volumes, pushing gross profit down to USD293.8 million from USD312.8 million.

The company said copper production over the full year will now be at the lower end of its 710,000 to 740,000 tonne target range, whilst cash costs and net cash costs will be a touch lower than previously expected.

Fellow miner BHP Billiton rose 0.2%. BHP said it entered the red in the last financial year after a steep drop in revenue caused it to report a loss from its operations and its finance costs increased, resulting in its dividend being slashed 76%.

The miner said its dividend for the full year will be 30.0 US cents per share compared to the 124.0 cents paid last year as BHP said it continued to deliver balance sheet strength and strong free cash flow. However, the company turned to a USD7.25 billion pretax loss in the financial year to the end of June from a USD8.05 billion profit in the previous year, as revenue declined to USD30.91 billion from USD44.63 billion on lower production and commodity prices.

Hochschild Mining rose 6.2%, the best mid-cap performer, after it increased its guidance for the full year and introduced an interim dividend for the first half of the year, as it turned to a substantial profit from a large loss last year.

In the UK corporate calendar Wednesday, Imperial Brands issues a trading statement, while Admiral Group, CLS Holdings, Balfour Beatty, Lookers, and Glanbia all release half-year results.

Elsewhere in the economic calendar Wednesday, the UK ILO unemployment rate is at 0930 BST, US MBA mortgage applications are at 1200 BST, while the EIA crude oil stocks data are at 1530 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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