LONDON MARKET CLOSE: Stocks mixed ahead of Federal Reserve minutes

Wed, 18th Aug 2021 17:02

(Alliance News) - Stocks in London ended mixed on Wednesday after a slowdown in UK inflation, while investors look ahead to the US Federal Reserve's meeting minutes as the tapering debate rumbles on.

The FTSE 100 index closed down 11.79 points, or 0.2%, at 7,169.32. The mid-cap FTSE 250 index closed up 142.84 points, or 0.6%, at 23,836.37. The AIM All-Share index ended up 7.75 points, or 0.6%, at 1,266.62.

The Cboe UK 100 index ended down 0.2% at 713.00. The Cboe 250 gained 0.8% at 21,660.60, and the Cboe Small Companies closed 0.4% higher at 15,472.10.

In Paris the CAC 40 ended down 0.7%, while the DAX 30 in Frankfurt ended up 0.3%.

"It's been a mixed day for markets in Europe with little in the way of a significant driver one way or the other, despite a positive hand-off from Asia. The latest inflation numbers from the UK and EU didn't provide much in the way of direction, while today's Fed minutes probably won't add much either," said CMC Markets analyst Michael Hewson.

In the FTSE 100, Just Eat Takeaway ended the best performer, up 5.2%. The food delivery platform was extending Tuesday's 2.9% gain after it said Tuesday profitability will start to improve from the second half.

Housebuilders Barratt Developments, Taylor Wimpey and Berkeley closed up 2.3%, 2.2% and 1.5% respectively following upbeat housing industry data.

UK house prices rose by 13% over the year to June, faster than at any point since November 2004, according to the Office for National Statistics. Across the UK, the average house price in June was a record GBP266,000.

In addition, Persimmon closed up 1.5% after the housebuilder said it saw a "robust" first half performance.

In the six months to June 30, pretax profit surged to GBP480.1 million from GBP292.4 million a year before, as revenue grew to GBP1.84 billion from GBP1.19 billion. This came as Persimmon's new home completions almost doubled to 7,406 from 4,900 and its new home average selling price increased to GBP236,199 from GBP225.066.

The housebuilder's current forward sales position, at June 30, was GBP2.23 billion, down from GBP2.48 billion at the same point a year before.

At the other end of the large-caps, BHP Group ended the worst performer, down 5.0%, following the miner's decision to call time on its London dual listing on Tuesday and move its primary listing to Sydney. The move would result in BHP losing its position in the UK flagship index if the plan is approved by shareholders, thus forcing index tracker funds to sell their shares.

"The prospect of an ugly tussle with shareholders over its dual-listing has put severe pressure on BHP today, dragging down the rest of the heavyweight London mining contingent, which has in turn put an end to the early hopes of a new 18-month high for the FTSE 100. BHP's move will go down badly with many UK investors, who will have grown accustomed to the solid dividends on offer at the miner," said IG Group's Chris Beauchamp.

Luxury brand Burberry Group ended down 4.3% amid concerns that China was looking at forms of wealth distribution. European high-end fashion brands Kering, LVHM and Hermes closed down 3.6%, 5.3% and 4.0% respectively in Paris.

China's top leaders plan to redistribute wealth, "adjust excessive incomes" and crack down on illicit gains in a bid to tackle inequality that could dent the fortunes of its richest, state media reported Wednesday.

The policy goal, announced in the readout from an economic planning meeting attended on Tuesday by President Xi Jinping, comes amid a sweeping push by Beijing to rein in the country's largest private firms in industries ranging from tech to education.

It also follows a wider effort to alleviate poverty - a central pillar of Xi's leadership - and as rumblings from the state crescendo on the type of capitalism China wants to have.

In the FTSE 250, Network International was the best performer, up 11%. The Middle East and Africa-focused payment solutions provider posted a first-half profit jump and said it expects revenue to beat pre-virus levels.

The company said revenue in the six months to June 30 rose 17% year-on-year to USD156.4 million from USD134.2 million. Pretax profit jumped to USD17.0 million from USD1.2 million a year earlier.

At the other end of the midcaps, Balfour Beatty closed 7.0% lower after the construction firm's London business struggled in the fist half.

In the half-year ended July 2, the company reported a pretax profit of GBP35 million, compared to a GBP26 million loss a year before. However, pretax profit remained 44% below the GBP63 million reported in the corresponding period in 2019.

Revenue increased slightly year-on-year to GBP4.15 billion from GBP4.12 billion, up 7.0% from the GBP3.88 billion reported in the equivalent period in 2019.

Balfour said the underlying loss from operations at its UK Construction arm was GBP23 million in the first half of 2021, unchanged from a year ago, while the US Construction business improved to an underlying profit of GBP20 million from GBP6 million a year ago.

The pound was quoted at USD1.3750 at the London equities close, firm against USD1.3742 at the close Tuesday.

On the economic front, UK consumer price inflation slowed in July, data from the Office of National Statistics showed.

The consumer prices index was unchanged in July versus the previous month, following June's 0.5% rise from May. Market consensus, cited by FXStreet, had predicted consumer prices to rise 0.3% in July from June.

Annually, the CPI rose by 2.0% in July, slowing from 2.5% to June, and behind the 2.2% rise predicted by the market according to FXStreet.

The Bank of England's inflation target is 2.0%, meaning the latest reading will provide respite to monetary policymakers on Threadneedle Street after months of pressure over their repeated mantra for "transitory" price rises.

Ben Carter, analyst at Validus Risk Management, said: "The BoE will be pleased to see the pullback to the target rate of 2% and well below last month's reading of 2.5%. They will hope it is a sign of transitory inflation but with Covid-19 partially closing a busy Chinese port late last week, it's clear the supply side inflation may be with us for some time yet.

"This will ease pressure on the BoE to offer forward guidance at the September policy meeting, and another print at or below 2% in September could see market expectations of a rate hike in the middle of 2022 be pushed back. However, today's reading is not likely not help sterling against the dollar as GBPUSD has struggled for ground over the last few days slipping below 1.3750 on the back of the dollar strength we are seeing with rising Covid-19 concerns."

The euro stood at USD1.1705 at the European equities close, down from USD1.1715 late Tuesday, even after an uptick in inflation on the continent.

Consumer prices in the euro area continued to climb in July, exacerbating inflationary fears for the single currency area's economy. Annual inflation for July accelerated to 2.2% in the euro area compared to 1.9% in June.

Inflation for the EU as a whole hit 2.5%, up from 2.2% a month earlier. The figures are in stark contrast to a year previous, when euro area and EU inflation rates were just 0.4% and 0.9% respectively.

Against the yen, the dollar was trading at JPY109.92, up from JPY109.60 late Tuesday.

Stocks in New York were mostly lower at the London equities close ahead of the US Federal Reserve meeting minutes.

The DJIA was down 0.1%, the S&P 500 index down 0.2%, but the Nasdaq Composite was up 0.1%.

Investors are looking ahead to minutes of the Federal Reserve's July meeting that will be released later Wednesday. Several top Fed officials have indicated in recent days they support cutting back on stimulus spending soon.

Brent oil was quoted at USD68.75 a barrel at the equities close, down from USD69.75 at the close Tuesday.

Gold was trading at USD1,779.25 an ounce at the London equities close, lower against USD1,783.45 late Tuesday.

The economic events calendar on Thursday has the latest US jobless claims figures at 1330 BST.

The UK corporate calendar on Thursday has annual results from Grosvenor casino operator Rank Group and interim results from Chilean copper miner Antofagasta and lender OSB Group.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com