LONDON MARKET MIDDAY: Stocks drift; pound dips after UK inflation data

(Alliance News) - Markets were trading sideways on Wednesday as traders mulled what a deceleration in the UK inflation rate could mean for the Bank of England's meeting next month.

Focus in the day ahead lies on another busy day for US corporate earnings, with the likes of Tesla, Verizon and IBM reporting.

The FTSE 100 index was up just up just 2.87 points at 7,220.40 on Wednesday. The mid-cap FTSE 250 index was down 46.44 points, or 0.2%, at 23,007.65. The AIM All-Share index was down 1.19 points, or 0.1%, at 1,238.71.

The Cboe UK 100 index was flat at 716.26. The Cboe 250 was down 0.5% at 20,720.30 and the Cboe Small Companies down 0.3% at 15,559.72.

In mainland Europe, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was up 0.1% on Wednesday.

"European markets are struggling to gain traction in early trade today, despite a welcome decline in UK CPI inflation that could take some of the heat off the Bank of England," said Joshua Mahony, senior market analyst at IG.

Data early Wednesday showed the UK inflation rate unexpectedly eased a touch last month.

The consumer price index rose 3.1% year-on-year in September, slowing from August's 3.2% growth. Analysts had been expecting the September reading to remain stable at 3.2%, according to FXStreet.

"Annual inflation fell back a little in September due to the unwinding effect of last year's 'Eat Out to Help Out', which was a factor in pushing up the rate in August," said Mike Hardie, head of Prices at the Office for National Statistics.

The data comes after recent comments from Bank of England Governor Andrew Bailey that the UK central bank will have to act to ease inflationary pressures - leading to warnings from economists that the BoE could raise rates as soon as next month.

The pound tumbled following the inflation data, quoted at USD1.3784 from USD1.3800 at the London equities close on Tuesday, suggesting doubts could be setting in over imminent monetary policy tightening.

However, Laith Khalaf at AJ Bell cautioned: "The latest numbers don't include the petrol pump crisis or the most recent surge in energy prices, or indeed the knock-on effects across the economy, so inflation will still get worse before it gets better."

There were no surprises in the eurozone, where the annual inflation rate for September was confirmed at 3.4%, picking up from 3.0% in August. The highest contribution to September's consumer price inflation rate came from energy prices, followed by services and non-energy industrial goods.

The euro traded at USD1.1632 midday Wednesday, soft against USD1.1640 late Tuesday.

Against the yen, the dollar rose to JPY114.43 from JPY114.23.

Gold was quoted at USD1,779.89 an ounce early Wednesday, higher than USD1,772.17 on Tuesday. Brent oil was trading at USD84.16 a barrel, easing from USD84.64 late Tuesday.

Wall Street is on track for a flat start as investors ready for another earnings-packed day. Reporting on Wednesday are electric car maker Tesla, telecommunications firm Verizon, and IT firm IBM.

Netflix late Tuesday reported a rise in earnings and subscriber growth as the subscription-based video streaming provider hailed its hit show 'Squid Game'.

However, shares were trading 2.4% lower pre-market as it warned its operating margin in the fourth quarter to set to tumbled to 6.5% from 14% a year ago.

"The likes of Leonardo DiCaprio, Jennifer Lawrence and Dwayne Johnson do not come cheap it would appear. If this is the kind of big budget spending the group now needs to keep up with rivals that is bad news for long-term profits," commented Hargreaves Lansdown analyst Nicholas Hyett on Netflix's margin.

In the UK, Antofagasta was weighing on the FTSE 100, down 3.8% after it warned copper output is set to slip next year.

In the third quarter ended September 30, copper output reached 181,100 tonnes, up 1.5% from 178,400 tonnes in the previous quarter. Higher output reflected increased production at Centinela, offset by lower throughput at Los Pelambres, the company said.

Antofagasta maintained its full-year copper production guidance of 710,000 to 740,000 tonnes. For 2022, however, it now expects slightly lower output of between 660,000 and 690,000 tonnes.

In the FTSE 250, Hammerson shares slipped 3.4% after the shopping centre owner said footfall is struggling to reach 2019 levels.

The FTSE 250-listed real estate investment trust, which owns shopping centres and mixed-use developments across Europe, said overall footfall in all territories was still 15% to 20% below 2019 levels. Rent collection rates improved, with 70% of group billable rent collected for the fourth quarter of 2020 so far. This is "significantly ahead of any quarter since the first quarter of 2020 at the same point in time", the firm noted.

Deliveroo shares rose 3.5% after the food delivery firm lifted its outlook after a "strong" third quarter, even as pandemic restrictions largely eased.

The food delivery firm reported annual growth in gross transaction value of 54% in the third quarter of 2021 at GBP1.59 billion, describing orders as "resilient" despite lockdown restrictions being eased in the UK. It did note a "modest" reduction in average order value, with this slipping 6% year-on-year to GBP21.4 from GBP22.8.

On the back of this, Deliveroo raised its full-year gross transaction value guidance to growth of 60% to 70%, versus prior guidance of 50% to 60%. Its margin outlook was unchanged, seen in a range of 7.50% to 7.75%.

On AIM, shares in Arena Events jumped 43% after agreeing to be taken over by Theta Bidco in deal worth enterprise value of GBP95.1 million. The suitor - owned by joint offerors IHC Industrial Holding and Tasheel Holding Group - will pay 21 pence per Arena share, being a 48% premium to Tuesday's closing price.

It values Arena's entire issued share capital at GBP71.0 million.

By Lucy Heming; lucyheming@alliancenews.com

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