LONDON MARKET CLOSE: Stocks bounce back; eyes on US inflation figures

(Alliance News) - Stocks in London were largely higher at the close on Wednesday, as deflationary news from China failed to dent market mood despite pointing to further weakness from the world's second largest economy.

The FTSE 100 index closed up 59.88 points, or 0.8% at 7,587.30 on Wednesday. The FTSE 250 ended up 95.66 points, or 0.5%, at 18,937.20. The AIM All-Share closed down 0.86 of a point, or 0.1%, at 757.98.

The Cboe UK 100 ended up 0.7% at 756.05, the Cboe UK 250 closed up 0.5% at 16,595.08, and the Cboe Small Companies ended up 0.7% at 13,242.99.

China slipped into deflationary territory for the first time since early 2020 as consumer prices contracted last month, official data showed.

The consumer price index fell 0.3% on-year in July, the National Bureau of Statistics said, having flatlined in June. Analysts polled by Bloomberg had anticipated a 0.4% decline in the index for July.

Tim Waterer, chief market analyst at KCM Trade, said the latest data did little to inspire confidence that an economic turnaround for China will be forthcoming.

"The data was definitely not good, but was it bad enough to prompt any immediate new stimulus measures from Beijing? Based on the rather measured approach from Chinese authorities so far this year, perhaps not, though time will tell," he added.

For AJ Bell's Russ Mould, meanwhile, the latest figures from China may give central bankers in the US, UK and Europe "pause for thought" when they weigh up their next steps.

"They cannot afford to repeat their earlier complacency over surging prices but they will want to avoid overdoing it, inflicting too much economic damage and perhaps being forced to undo their hard work by cutting rates before they're ready to," he said.

Investors' attention will now turn towards the latest inflation print from the US, due on Thursday at 1330 BST. According to FXStreet-cited consensus, headline inflation in the US is expected to pick up to a 3.3% annual rise in July, from 3.0% in June.

KCM Trade's Waterer explained that Thursday's figures will be assessed in terms of whether inflation is receding fast enough to "cement the case" for a pause in interest rate hikes by the US Federal Reserve in September.

Markets currently see a 87% chance of the Fed holding interest rates steady at its September meeting, according to the CME FedWatch tool.

The dollar was mixed ahead of the eagerly-awaited inflation print.

The pound was quoted at USD1.2717 at the London equities close on Wednesday, virtually unchanged from USD1.2718 at the close on Tuesday.

The euro stood at USD1.0977, higher against USD1.0947 at the same time on Tuesday. Against the yen, the dollar was trading at JPY143.60, higher compared to JPY143.29.

Stocks in New York were lower at the London equities close, with the Dow Jones Industrial Average down 0.4%, the S&P 500 index down 0.6%, and the Nasdaq Composite down 1.2%.

In London, Hiscox was the worst blue-chip performer at the close on Wednesday, finishing 5.7% lower despite reporting a surge in interim profit.

The insurer said its pretax profit in the first half of 2023 jumped tenfold to USD264.8 million from USD25.4 million a year prior. This means that Hiscox's first half-year profit was almost as high as that of its entire 2022 profit of USD275.6 million.

Flutter Entertainment dropped 3.8% as the gambling firm's trickier time in Australia overshadowed the good news of a US "inflection point".

The Paddy Power owner said its US arm reached an "inflection point", helping the gambling firm to swing to a first-half profit of GBP83 million from a loss of GBP51 million the year prior.

However, Flutter warned that "softer than expected" market conditions in Australia would offset the strong momentum seen in the UK, Ireland and some of its other international markets.

In the FTSE 250, IWG was the top performing stock, closing up 9.6% as it reported "record" interim revenue, helped by progress in its hybrid working platform Worka.

IWG said revenue in the first half of 2023 totalled GBP1.48 billion, up 15% from GBP1.29 billion a year earlier. This helped drive the company's earnings before interest, tax, depreciation, and amortization 48% higher to GBP198 million from GBP131 million.

Elsewhere in London, On The Beach jumped 9.9%. The beach holiday retailer benefited amid gains in the travel sector, prompted by positive updates from Tui.

The Hanover, Germany-based holiday operator said pretax profit in the three months to June 30 was EUR47.0 million, swung from a loss of EUR161.6 million a year prior. Revenue in the quarter grew 19% to EUR5.29 billion from EUR.4.43 billion, driven by more people going on holidays.

Looking ahead, Tui reiterated its expectations for a "strong summer", with bookings close to pre-pandemic levels at 95%, compared to 90% a year ago.

Shares in Tui, meanwhile, closed 3.4% lower.

In European equities on Wednesday, the CAC 40 in Paris ended up 0.7%, while the DAX 40 in Frankfurt ended 0.5% higher.

Fawad Razaqzada, market analyst at City Index and FOREX.com, said the bounce in European equities on Wednesday was "nothing more than a relief rally" after the Italian government provided some clarity on its windfall tax on banks.

"There was little clarity on the details of the new tax, but now that the government confirmed that the levy won't exceed 0.1% of each bank's asset, this was met with relief," Razaqzada said.

Brent oil was quoted at USD86.92 a barrel at the London equities close on Wednesday, up from USD84.92 late Tuesday. Gold was quoted at USD1,916.66 an ounce, down from USD1,925.90.

In UK corporate calendar on Thursday, there are half-year results from Antofagasta, Deliveroo and Entain.

The economic calendar has US inflation data at 1330 BST, alongside the US weekly unemployment claims report.

By Heather Rydings, Alliance News senior economics reporter

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