(Alliance News) - Stock trading in London is set for a subdued start on Wednesday as investors await inflation data and the opening of US banking earnings season.
In early UK company news, Barratt Developments said it is weathering supply chain disruptions and backed its outlook. WPP unveiled the merger of subsidiary Finsbury Glover Hering with Sard Verbinnen & Co to create a strategic communications titan. THG aimed to reassure shareholders after Wednesday's 35% share price slump.
Economic data released before the market open showed the UK economy grew 0.4% month-on-month in August, but July's reading was revised down.
"The economy picked up in August as bars, restaurants and festivals benefited from the first full month without Covid-19 restrictions in England. This was offset by falls in health activity with fewer people visiting GPs and less testing and tracing," said Darren Morgan, director for Economic Statistics at the Office for National Statistics.
IG says futures indicate the FTSE 100 index of large-caps will open down 7.93 points, or 0.1%, at 7,122.30 on Wednesday. The FTSE 100 closed down 16.62 points, or 0.2%, at 7,130.23 on Tuesday.
The muted start in London follows modest falls in the US and Asia overnight as investors await key inflation data.
In the US on Tuesday, the Dow Jones Industrial Average ended down 0.3%, the S&P 500 down 0.2%, and the Nasdaq Composite down 0.1%.
Due at 1330 BST, a US inflation reading for September is expected to show annual consumer price growth remained stable at 5.3% year-on-year.
"European markets are likely to take their cue from Wall Street and open slightly lower," said Jeffery Halley, senior market analyst at Oanda, adding that stocks in New York will be "beholden to the US inflation data".
The data comes after a Federal Reserve official said Tuesday the US is nearly ready for the central bank to pull back on its stimulus, and the high inflation may soon retreat.
The Fed last month signalled it would "soon" be ready to begin the process of ending its massive monthly purchases of bonds and other securities intended to help the country weather the Covid-19 downturn.
In a speech to the Institute of International Finance, Fed Vice Chair Richard Clarida said the world's largest economy was nearing completion of the "substantial further progress" test the central bank has set to determine when to back off its stimulus policies.
Fed meeting minutes are due on Wednesday at 1900 BST.
Inflation also was in focus in Europe, as data confirmed German consumer prices ticked up 4.1% year-on-year in September, accelerating from 3.9% in August. This was the highest inflation rate since 1993, when German prices rose 4.3%.
There was gross domestic product data out for the UK, with the economy growing 0.4% month-on-month in August to bring output 0.8% below pre-virus levels. This was slightly below consensus for 0.5% growth, according to FXStreet, while July's reading was revised down to a contraction of 0.1% from growth of 0.1%.
"Later and slightly weaker data from number of industries now mean we estimate the economy fell a little overall in July," said the ONS's Morgan.
Sterling was quoted at USD1.3606 early Wednesday, up from USD1.3595 at the London equities close on Tuesday. The euro traded at USD1.1548, firm against USD1.1544 late Tuesday. Against the yen, the dollar advanced to JPY113.50 versus JPY113.34.
The mood was subdued in Asia overnight, with the Japanese Nikkei 225 index closing down 0.3%. In China, the Shanghai Composite was up 0.6%, while trading in Hong Kong was suspended due to a typhoon. The S&P/ASX 200 in Sydney ended down 0.1%.
China's exports rose unexpectedly in September, official data showed Wednesday, despite fears that a recent power crunch in the country might hamper production.
Exports rose a better-than-expected 28% on-year in September, according to customs authorities – up from 26% in August. However, imports missed predictions and rose 18%, just over half as much as the previous month's increase.
Gold was quoted at USD1,762.50 an ounce early Wednesday, flat against USD1,763.12 on Tuesday. Brent oil was trading at USD83.28 a barrel, softening from USD83.50 late Tuesday.
In early UK company news, Barratt Developments backed its outlook after seeing ongoing strength in demand for homes.
For the financial year to date, it has seen net private reservations per average week of 281, down slightly from 288 in the same period a year ago but up on 262 two years ago.
"Whilst the net private reservation rate was 2.3% below that reported in the prior year period, this was a particularly active period reflecting both pent-up demand following the initial national lockdown, and increased Help to Buy reservation activity," the housebuilder explained.
Despite global supply chain issues, Barratt said it has not experienced any significant disruption to its build programme. It continues to expect build cost inflation of between 4% and 5% for the full-year.
"Whilst there continues to be some macroeconomic uncertainty, the board believes that our strong financial position provides us with the platform and flexibility to react to any changes in FY22 and beyond," said Barratt.
Advertising and marketing firm WPP said its majority-owned subsidiary Finsbury Glover Hering is to merge with Sard Verbinnen & Co to create "the world's leading strategic communications firm".
The transaction values the combined Finsbury Glover Hering-SVC group at an equity value of USD917 million, and SVC alone at USD303 million. WPP will be the majority shareholder of the combined group, holding a 57.4% stake.
The deal is expected to complete in the fourth quarter of 2021 and the combined firm, headquartered in New York, will start operating under a new name in 2022.
British Gas parent Centrica has decided to delay its November capital markets day to retain focus amid the "current unprecedented commodity price environment".
A surge in natural gas prices since the start of the 2021 has put pressure on UK energy providers, with a number of smaller utility firms failing in recent weeks.
Centrica said its performance since July has been in line with expectations, and it is "well hedged" for the winter and beyond. The balance sheet remains strong, it added.
"In this current unprecedented commodity price environment we remain focused on looking after our residential and business customers, whilst working as part of wider industry efforts in the UK to support the customers of failed suppliers and drive the regulatory reforms which are urgently required to make sure this situation never recurs," said Chief Executive Chris O'Shea,
Shares in online retail platform THG will be in focus on Wednesday, after the stock fell 35% on Tuesday. Better known as The Hut Group, the company held its first capital markets day since it listed in September 2020.
The meeting was meant to reassure shareholders after a tough month for the firm's share price. But instead it spooked them. The drop started at around 3pm on Tuesday afternoon.
THG on Wednesday noted the share price fall and stressed that it has "consistently" delivered ahead of its targets since floating in September last year.
"The group also has a very strong liquidity position as it enters its peak trading season," THG added.
And in focus in the US is the kick-off of banking earnings season, with JPMorgan Chase reporting third-quarter results.
By Lucy Heming; lucyheming@alliancenews.com
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