LONDON MARKET MIDDAY: Markets Eye Kick-Off Of US Bank Earnings Season

(Alliance News) - London stocks were in the red at midday on Tuesday as investors await the start of US earnings season with reports from JPMorgan and Citigroup.

The blue-chip FTSE 100 index was down 23.42 points, or 0.4%, at 5,977.96 midday Tuesday. The mid-cap FTSE 250 index was down 161.93 points, or 0.9%, at 18,005.78. The AIM All-Share index was down 0.4% at 989.05.

The Cboe UK 100 index was down 0.4% at 594.33. The Cboe 250 was down 1.2% at 15,230.79, and the Cboe Small Companies down 0.5% at 9,513.33.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both down 0.3% in the afternoon.

"Shares drifted lower at the beginning of the European trading session on Tuesday as market sentiment remains weighed down by increasing uncertainty, despite encouraging Chinese data overnight," said Pierre Veyret, technical analyst at ActivTrades.

Also keeping traders cautious is the start of US earnings season, with banking heavyweights JPMorgan and Citigroup reporting ahead of Tuesday's New York open.

The Dow Jones is called down 0.4% and the S&P 500 down 0.1%, though the Nasdaq is pointed up 0.9%.

"With US banks putting earnings season into high gear today some caution was to be expected, particularly after the gains in equities over the past two weeks," said IG's Chris Beauchamp.

Eyes are also on US tech, with Apple set to unveil its iPhone 12 at a product launch event and Amazon.com's annual Prime Day kicking off.

Apple shares closed up 6.4% in New York on Monday and gained 1.9% pre-market. Amazon shares rose 4.8% on Monday and advanced a further 1.5% pre-market on Tuesday.

In London, SSE was the top performer in the FTSE 100, rising 3.2% after agreeing to sell its 50% share in energy-from-waste ventures Multifuel Energy and Multifuel Energy 2.

SSE will be selling its share to European Diversified Infrastructure Fund III, an infrastructure fund managed by First Sentier Investors, for GBP995 million in cash. The transaction is expected to be completed in late 2020.

Multifuel Energy and Multifuel Energy 2 are joint ventures between SSE and Wheelabrator Technologies. Multifuel Energy consists of the operational Ferrybridge Multifuel 1 and Ferrybridge Multifuel 2 facilities, as well as the Skelton Grange Multifuel development project - all in west Yorkshire.

Tesco rose 1.5% following the latest grocery market figures from Kantar.

In the 12 weeks to October 4, UK take-home grocery sales grew by 9.4%. However, in the shorter period of four weeks to October 4, sales increased by 10.6%, an acceleration from September.

Among the "Big Four" UK grocers, Tesco saw a 9.2% sales rise to GBP7.84 billion, but its market share remained flat at 26.8%.

J Sainsbury booked a 6.8% sales jump to GBP4.35 billion. Its market share slipped to 14.9% from 15.3%. At Wm Morrison Supermarkets, sales rose 12% year-on-year to GBP2.95 billion, with market share up to 10.1% from 9.9%.

Morrisons shares were up 1.0% at midday, while Sainsbury's rose 0.6%.

Walmart's Asda had a 5.4% annual sales rise to GBP4.21 billion, but its market share fell to 14.4% from 15.0%. The US retail chain earlier in October agreed to sell Asda to Issa Brothers and UK-based private equity firm TDR Capital for GBP6.8 billion.

In the FTSE 250, Mitchells & Butlers fell 5.5% as it opened redundancy consultations with "a number of our front-line team" due to the "exceptionally challenging" trading environment created by Covid-19 and government restrictions to check its spread.

The company - which owns the Harvester, O'Neills, and All Bar One chains - did not confirm the number of redundancies, but said it would seek to redeploy affected staff.

Mitchells & Butlers operates around 1,700 restaurants and pubs and employs around 44,000 people all over the UK, according to the company's website.

The announcement by the FTSE 250-listed company follows the setting out of the UK government's new three-tier restriction system for England, with the Liverpool city region placed in the most serious "very high" risk category from Wednesday.

UK Prime Minister Boris Johnson announced the closure of pubs and bars across Merseyside on Monday as he launched a three-tier system of local alert levels for England.

The very high alert level will mean, at a minimum, the closure of pubs and bars and a ban on social mixing indoors and in private gardens.

Areas in the top tier will be able to impose extra restrictions, and in the Liverpool city region this will mean the closure of leisure centres, gyms, betting shops and casinos.

The latest lockdown restrictions spell further trouble for the UK labour market, after figures on Tuesday morning showed the unemployment rate rose to 4.5% for the June to August period.

Consensus, according to FXStreet, had seen the jobless rate holding steady at the revised 4.3% seen for the May to July period.

The last time the unemployment rate was this high was back in 2017, when the rate was 4.5% for the three months to April and preceded by a rate of 4.6% for the three months to March.

Early numbers for September suggest there is "little change" in the number of payroll employees in the UK, the ONS said. While this is up 20,000 compared with August, the number of employees has fallen by 673,000 since March.

Laith Khalaf, financial analyst at AJ Bell, commented: "August was the month where employers started to pay towards the cost of furloughed employers - only employer National Insurance payments and pension contributions at that point, but even more is required in September and October. The new Jobs Support Scheme will help to cushion the blow, but we're likely looking at the thin end of the wedge when it comes to unemployment."

Sterling was quoted at USD1.3050 at midday, lower than USD1.3070 at the London equities close on Monday.

The euro traded at USD1.1790 on Tuesday, down on USD1.1807 late Monday.

Against the yen, the dollar edged up to JPY105.46 versus JPY105.28.

Gold was quoted at USD1,921.54 an ounce midday Tuesday, firm on USD1,921.20 on Monday. Brent oil was trading at USD42.47 a barrel, higher than USD41.64 late Monday.

To come in the international economics calendar Tuesday, there is a US consumer price index reading at 1330 BST.

By Lucy Heming; lucyheming@alliancenews.com

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