LONDON MARKET MIDDAY: FTSE 100 underperforms but pound steadies

(Alliance News) - Blue-chip European equities traded off session highs heading into Tuesday afternoon, with early morning confidence giving way to caution as the session wore on.

Stock markets were struggling to shake off interest rate and recession worries among investors.

London's FTSE 100 underperformed, with its retail and housebuilding sectors its undoing, as traders fret over the possibility of chunkier rate hikes by the Bank of England to defend a hard-pressed pound.

The FTSE 100 index was down 6.57 points, or 0.1%, at 7,014.38 midday Tuesday. The mid-cap FTSE 250 index was down 51.87 points, or 0.3%, at 17,670.96. The AIM All-Share index was down 0.66 point, or 0.1%, at 827.23.

The Cboe UK 100 index was up 0.2% at 700.29. The Cboe 250 was down 0.2% at 15,120.02, and the Cboe Small Companies was down 0.1% at 12,865.32.

The CAC 40 stock index in Paris was up 0.7% midday Tuesday, while the DAX 40 in Frankfurt was up 0.8%.

The FTSE 100 had been 0.7% higher earlier on Tuesday, while the CAC had been up as much as 1.4% and the DAX had been 1.5% higher.

European equities made a decent start of Tuesday, but the strong opening trade gave way to caution by the end of the morning.

Stocks in New York were called higher on Tuesday, after five successive days of losses. The Dow Jones Industrial Average was called up 0.5%, the S&P 500 0.7% higher, and the Nasdaq Composite up 1.0%.

The euro inched up to USD0.9633 midday Tuesday UK time from USD0.9626 at the European equities close on Monday. Against the yen, the dollar slipped to JPY144.28 from JPY144.41.

Sterling fetched USD1.0812 midday Tuesday, up from USD1.0655 at the London equities close on Monday.

"The pound is attempting to recover some lost ground after yesterday’s plunge thanks to US dollar profit taking and a sense that Monday's knee-jerk sell-off was overdone. Although GBP-USD is trading back up around USD1.08, the currency pair is still down 20% year-to-date underpinned by strong demand for the greenback and a lack of international investor confidence in the UK's economic outlook and its policymakers," interactive investor analyst Victoria Scholar commented.

Despite ruling out an unscheduled rate rise, there is a growing conviction the Bank of England will have to implement a more aggressive rate rise.

The BoE next announces an interest rate decision on November 3. On November 23, the UK Treasury will publish a "medium-term fiscal plan", which was previously slated for the new year.

The possibility of heftier BoE rate hikes hit London-listed housebuilders and retailers again.

Taylor Wimpey fell 1.9%, Persimmon lost 1.6%, and high street retailer Next fell 1.7%.

Elsewhere in London, Biffa jumped 28% after it backed a GBP1.3 billion takeover offer from private equity firm Energy Capital Partners, an investor in the fields of energy transition, renewables and infrastructure.

ECP will pay 410 pence cash for each share in the High Wycombe, Buckinghamshire-based waste management firm, a 27% premium to its 323.90p closing price on Monday.

The acquisition price is, however, 7.9% lower than an initial 445p per share proposal made back in June.

Biffa shares traded at 408.26p at midday, giving it a market capitalisation of GBP1.25 billion.

At the other end of the FTSE 250 stocks, Close Brothers fell 5.6%. It posted a decline in annual profit and income, as its Winterflood stockbroking business faced a tough comparator.

In the financial year ended July 31, the London-based merchant bank posted an operating pretax profit of GBP232.8 million, down 12% from GBP265.2 million the year before.

Operating income fell 1.7% to GBP936.1 million from GBP952.6 million.

"Winterflood saw a 48% reduction in income, reflecting a market-wide slowdown in trading activity from elevated levels during the pandemic and a change in the mix of trading volumes, exacerbated by periods of volatility in falling markets," Close Brothers said.

Still, Close Brothers raised its payout by 10% to 66.0p per share from 60.0p.

Saga tumbled 20% as the company swung to a sizeable half-year loss due to insurance-related impairments.

Saga provides insurance, cruises and package holidays to people over 50.

While revenue in the half year that ended July 31 improved, jumping 65% to GBP258.3 million from GBP156.4 million, its bottom-line figure was markedly worse.

Saga posted a GBP257.5 million pretax loss, swinging from a GBP700,000 profit a year earlier. Saga booked a GBP269.0 million impairment of insurance goodwill. The hit is due to a weaker outlook for future motor and home margins.

Back in July, analysts at Peel Hunt had warned that Saga's introduction of new insurance products was likely to hurt its insurance broking business, and would likely result in a goodwill impairment in its first half results.

Peel Hunt had pencilled in Saga making a more modest non-cash impairment of GBP150 million.

For the whole financial year, Saga lowered guidance for underlying pretax profit to a range of GBP20 million to GBP30 million from a previous range of GBP35 million and GBP50 million.

Gold fell to USD1,637.32 an ounce midday Tuesday from USD1,639.00 late Monday. A barrel of Brent firmed to USD85.45 from USD85.30.

Still to come on Tuesday, are US durable goods orders at 1330 BST before a US consumer confidence reading at 1500 BST.

By Eric Cunha; ericcunha@alliancenews.com

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