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LONDON MARKET CLOSE: Retailers on back foot as UK inflation tops 11%

16th Nov 2022 16:55

(Alliance News) - Stock prices in London closed lower on Wednesday in a day of risk aversion for global markets, with inflationary and geopolitics fears rife.

Investors were initially spooked by the news of a missile hitting Poland, as the Nato member found itself in the cross-hairs of the Russia-Poland conflict. While the strike is now believed to have not been pre-meditated, it was nonetheless a reminder of the fragile geopolitical situation.

Another red-hot UK inflation reading, meanwhile, turned the heat up on the Bank of England, and the UK government, ahead of a fiscal policy announcement.

The FTSE 100 index ended 18.25 points lower, 0.3%, at 7,351.19 on Wednesday. The FTSE 250 ended down 343.48 points, or 1.8%, at 19,112.40, and the AIM All-Share ended down 8.58 points, 1.0%, at 839.88.

The Cboe UK 100 ended marginally lower at 735.56. The Cboe UK 250 closed down 1.9% at 16,460.30, while the Cboe Small Companies closed down fractionally at 12,872.47.

Stocks on the continent closed lower. The CAC 40 index in Paris ended down 0.5%, while the DAX 40 in Frankfurt closed 1.0% lower

In New York, the Dow Jones Industrial Average traded flat at the time of the London equities close, the S&P 500 lost 0.5% and the Nasdaq Composite was 1.2% lower.

"Stocks have pushed to the downside in lacklustre trading, as the positive momentum established by last week's CPI figure disappears. This may well only be a temporary development, and the gains of the past week or so certainly suggest that the market is in a mood to push higher into the end of the year," IG analyst Chris Beauchamp commented.

Markets struggled to find their foot in a tepid day for stocks on Wednesday. The mood was initially hit by the missile report in Poland.

Western leaders, however, have since played down fears that a deadly missile blast in eastern Poland could herald a dangerous escalation in the war Russia launched against Ukraine, blaming stray anti-aircraft fire.

Poland and Nato said the explosion was likely caused by a Ukrainian air defence missile launched to intercept a Russian barrage, but that Moscow was ultimately to blame for starting the conflict.

"Officials offered a calmer reaction to yesterday's missile strike on Poland, and this has helped ease market anxiety. Nato consultations are likely, but it does not look like it will necessarily lead to an escalation," Bannockburn Global Forex analyst Marc Chandler commented.

The pound was quoted at USD1.1883 late on Wednesday afternoon in London, down a touch from USD1.1891 late Tuesday. The euro traded at USD1.0405, up from USD1.0385 late Tuesday. Against the yen, the dollar was quoted at JPY139.43, up from JPY139.16 on Tuesday.

Annual inflation in the UK reached a never-before-seen high last month, data from the Office for National Statistics showed.

The consumer price index rose 11.1% in October from a year before, and up from 10.1% in September.

This was the highest annual CPI rate in the current National Statistic series, which began in January 1997.

The reading will keep the Bank of England on its toes, though focus for now shifts to fiscal policymakers. UK Chancellor Jeremy Hunt announces an autumn statement on Thursday.

Analysts at Rabobank commented: "For GBP to react positively to the autumn statement, it will likely have to contain measures that will protect and support investment potential which will boost the outlook for productivity and low inflationary growth over the medium-term. The outlook for cable will likely remain heavily buffeted by volatility in the USD in the days and weeks ahead."

Cable refers to the exchange rate between the pound and dollar.

In London, blue-chip retail shares ended lower, spooked by another robust UK inflation reading.

JD Sports fell 4.0%, Next lost 3.0% and Sports Direct owner Frasers gave back 2.6%.

At the other end of the large-caps, Sage added 7.4% after the enterprise software company reported strong annual revenue growth, lifted its total payout, and guided "strong momentum" moving forward.

In the financial year that ended September 30, Sage posted a pretax profit of GBP337 million, down 2.9% from GBP347 million the previous year.

Revenue, however, rose 5.4% to GBP1.95 billion from GBP1.85 billion, underpinned by its Sage Business Cloud arm, which reported 24% revenue growth on an organic recurring basis.

CMC Markets tumbled 13% as it issued a slight caution on costs. The London-based financial trading platform maintained annual operating cost guidance of GBP215 million, but warned that ongoing sterling weakness and the "rate of recruitment" could result in higher expenses.

For the six months to September 30, CMC said profit modestly increased amid an acceleration in its foreign exchange and commodities activity, alongside normal index flow operations.

Chief Executive Peter Cruddas said CMC is on track to deliver on its three-year expansion initiatives, aimed at driving higher revenue.

Hill & Smith added 5.3%, after a robust trading performance in the four months to October 31 prompted the infrastructure engineering firm to up guidance.

The company now expects full-year operating profit from continuing operations to be "ahead of the top end of current analyst consensus" of between GBP84.9 million and GBP89.7 million.

On AIM, Harland & Wolff jumped 79% after it was awarded preferred bidder status on the GBP1.6 billion Fleet Solid Support contract, as part of a collaboration with BMT and Navantia.

The collaboration, named Team Resolute, will build three new Fleet Solid Support ships for the Royal Navy.

Gold was priced at USD1,777.45 an ounce late Wednesday, up from USD1,770.82 late Tuesday. Brent oil fetched USD91.89 a barrel, down sharply from USD93.03 as geopolitical fears ebbed.

Thursday's economic calendar has a eurozone inflation reading at 1000 GMT, before the UK autumn statement around 1230 GMT. Elsewhere, there are speeches from various US monetary policymakers, including Federal Reserve St Louis President James Bullard, Fed Atlanta President Raphael Bostic and Fed Cleveland President Loretta Mester.

The local corporate calendar has half-year results from luxury retailer Burberry, pub chain Fuller, Smith & Turner and Royal Mail owner International Distributions Services.

By Eric Cunha; [email protected]

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