LONDON MARKET MIDDAY: Stocks down as investors wait for US inflation

(Alliance News) - Stock prices in London were lower at midday Wednesday as investors eyed a key US inflation reading later in the day, ahead of the Federal Reserve's interest rate decision next week.

Stocks in Europe were also hurt by a fall in eurozone industrial production, as investors nervously wait for Thursday's interest rate decision from the European Central Bank.

The FTSE 100 index was down 26.10 points, 0.4%, at 7,501.43. The FTSE 250 was down 95.24 points, 0.5%, at 18,447.06, and the AIM All-Share was down 1.02 points, 0.1%, at 742.19.

The Cboe UK 100 was down 0.4% at 747.33, the Cboe UK 250 was down 0.4% at 16,106.92, and the Cboe Small Companies was up 0.2% at 13,467.80.

In European equities on Wednesday, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 0.7%.

Eurozone industrial production fell more sharply than expected in July, according to the latest figures from Eurostat.

The new data shows further signs of a slowdown in the eurozone economy, before the ECB will make an interest rate decision on Thursday.

In July, seasonally adjusted industrial production fell by 1.1% month-on-month, after increasing by 0.4% in June. This was worse than FXStreet-cited market consensus, which had expected industrial production to fall by 0.7%.

On an annual basis, eurozone industrial production fell by 2.2%, after a 1.1% fall in June. This was significantly worse than consensus, with markets expecting a 0.3% fall.

"The print sets the stage for another weak quarter for the industrial sector, in line with the recent run of gloomy confidence data and our expectations. Barring surprises, it would be the fourth consecutive quarter of contraction," said Oxford Economics.

Focus is now on US inflation data. According to FXStreet-cited consensus, headline CPI is expected to accelerate to 3.6% on an annual basis in August from 3.2% in July.

"All eyes are on US inflation numbers set to be released later today as this data is crucial to the Federal Reserve's decision-making on whether to keep raising interest rates or not," said Russ Mould, investment director at AJ Bell.

Currently, markets see a 93% chance of interest rates standing pat at the Federal Reserve's next meeting, according to the CME FedWatch Tool. At the following meeting in November, however, markets see a 59% chance of the Fed lifting rates by 25 basis points.

The recent rise in oil prices is fuelling fears of a return to inflationary pressures in the global economy. Brent oil was quoted at USD92.51 a barrel early in London on Wednesday, up from USD92.26 late Tuesday.

"Oil prices have risen by more than 25% over the past few months, which suggests a new inflationary pressure and something that will muddy the outlook for the Fed at its next rate meeting," Mould warned.

Ahead of the reading, stocks in New York were called lower. Both the Dow Jones Industrial Average and the S&P 500 index were called down 0.2%, while the Nasdaq Composite was called down 0.3%.

The pound was quoted at USD1.2465 at midday on Wednesday in London, lower compared to USD1.2477 at the equities close on Tuesday. The euro stood at USD1.0737, higher against USD1.0729. Against the yen, the dollar was trading at JPY147.40, up compared to JPY147.13.

In the FTSE 100 index, Aviva rose 2.5%.

The London-based provider of insurance, wealth and retirement products said it has agreed to sell its quarter ownership of Singapore Life to fellow shareholder Sumitomo Life Insurance for a total of SGD1.4 billion, about GBP800 million.

It explained that the exit from the joint venture is part of its effort to simplify its business and focus on the UK, Ireland and Canada.

HSBC was up 2.0%. Goldman Sachs raised the bank to 'buy' from 'neutral'.

In the FTSE 250 index, Redrow rose 5.3%.

The Ewloe, Wales-based housebuilder said pretax profit in the financial year ended July 2 climbed 61% to GBP395 million from GBP246 million, due to "cost inflation exceeding house price inflation". Revenue fell slightly by 0.5% to GBP2.13 billion from GBP2.14 billion a year prior.

Looking ahead, Redrow said the financial 2024 market is still "challenging" but is well-positioned to respond. It expects to generate lower revenue of between GBP1.65 billion to GBP1.70 billion in the next financial year, while pretax profit is expected at between GBP180 million and GBP200 million.

Amongst London's small-caps, On the Beach jumped 15%.

The Manchester, England-based online beach holiday retailer said it "will deliver record [total transaction value] and revenue" for the year ending September 30. It expects TTV to be up 26% to around GBP1.1 billion, from GBP856.1 million last year.

On The Beach delivered GBP144.1 million in total revenue in financial 2022, surging from GBP21.2 million the year before.

On The Beach said this "record" performance was driven by increased volumes and average booking values, and underpinned by "enhanced platform capabilities and a well-executed strategy across brand and proposition."

Meanwhile, Tullow Oil was down 10%.

The oil and gas producer said revenue in the six months ended June 30 fell to USD777 million from USD859 million a year earlier. Pretax profit more than halved to USD217.2 million from USD560.5 million.

Looking ahead, Tullow Oil lowered its full-year oil production guidance to 58,000 to 60,000 barrels of oil per day, from 58,000 to 64,000.

On AIM, IOG plummeted 33%.

It said operating efficiency for the Blythe H2 well in the UK North Sea was up in August compared to the year-to-date, but still expressed concerns about its financial position and that the gas rate fell over the month.

Gold was quoted at USD1,911.71 an ounce at midday Wednesday, lower than USD1,912.01 on Tuesday.

By Sophie Rose, Alliance News reporter

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