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LONDON MARKET MIDDAY: FTSE 100 edges lower ahead of US inflation print

31st Aug 2023 12:00

(Alliance News) - The FTSE 100 tipped into the red at midday on Thursday as investors nervously awaited the latest print of the US Federal Reserve's preferred inflationary gauge, the personal consumption expenditures index.

"The markets are so data driven right now, aping the stance adopted by central bankers, and it feels like a worse than expected reading could extinguish the recently improved sentiment," said Russ Mould, investment director at AJ Bell.

The FTSE 100 index was down just 1.20 points at 7,472.49. Meanwhile, the FTSE 250 was up 61.44 points, or 0.3%, at 18,625.72. The AIM All-Share was down 0.59 of a point, or 0.1%, at 741.45.

The Cboe UK 100 was down 0.1% at 744.08, the Cboe UK 250 was up 0.4% at 16,285.16, and the Cboe Small Companies was flat at 13,030.62.

In recent days, a slew of softer economic data in the US painted a picture of a slowing economy, fuelling hopes that interest rates in the world's largest economy have peaked.

Currently, the market sees an 89% chance of the US central bank holding rates steady at its next meeting in September and a 56% chance of rates holding steady again at the following meeting in November.

However, this could all change if the Federal Reserve's preferred measure of inflation - the personal consumption expenditures index - comes in stronger than anticipated at 1330 BST on Thursday.

Markets are expecting the index to tick up to 3.3% on an annual basis from 3.0% in June, according to FXStreet-cited consensus.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, warned that a "bad surprise on the topside" for the PCE print could "wash out" the past days' optimism regarding the future of the Fed policy.

"So, fingers crossed, we really need the US inflation to fall, and to stay low," she said.

The dollar was stronger amid pre-inflation print jitters.

The pound was quoted at USD1.2684 at midday on Thursday in London, down from USD1.2732 at the close on Wednesday. The euro stood at USD1.0875, lower against USD1.0931 on Wednesday.

Against the yen, the dollar was trading at JPY145.90, higher compared to JPY145.75.

Stocks in New York were seen largely higher, with the Dow Jones Industrial Average called up 0.4% and the S&P 500 index up 0.1%. The Nasdaq Composite meanwhile was called down 0.1%.

In London, Standard Chartered fell 0.3% after it announced that Chief Financial Officer Andy Halford plans to step down, having been with the firm since 2014.

The Asia-focused bank said Halford will be succeeded by Diego De Giorgi who will join the company on Friday as CFO designate. De Giorgi will be appointed to CFO in the first quarter of next year.

De Giorgi was most recently the co-chief executive of Pegasus Europe, which Standard Chartered said is "Europe's largest-ever special purpose acquisition company".

In the FTSE 250, Marks & Spencer added 1.0% amid the news the stock will be returning London's premier FTSE 100 index after nearly four years of absence.

The retailer is currently enjoying a whirlwind run on the stock market with shares up around 79% in the year-to-date. It was a founding constituent of the list of London's top-tier stocks and had a 35-year stay on the FTSE 100.

Meanwhile, CMC Markets fell 5.1% as FTSE Russell confirmed the online trading platform will be ousted from the FTSE 250.

FTSE Russell confirmed on Wednesday that the changes will take effect to its UK indices from the market open on Monday, September 18.

Elsewhere in London, Alfa Financial Software added 2.9% as it posted a rise in interim profit and revenue on the back of cross-divisional growth and backed its full-year expectations despite an "uncertain" economic outlook.

In the six months that ended June 30, the London-based software developer posted a pretax profit of GBP16.6 million, up 20% from GBP13.8 million a year prior.

Revenue climbed 21% to GBP52.9 million from GBP43.9 million the year before. The firm said the figure benefited from growth across all divisions, in particular Software, which contributed a 33% increase in revenue.

On AIM, Harland & Wolff surged 23% after it announced that the judicial review of its Islandmagee gas storage project had been made in its favour.

Islandmagee is a salt cavern gas storage facility in Antrim, Northern Ireland. The company obtained a marine licence for the project from Northern Ireland's Department of Agriculture, Environment & Rural Affairs in November 2021.

In European equities on Thursday, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was down 0.6%.

The CAC 40 underperformed as fresh data revealed French consumer price inflation picked up in August.

According to preliminary figures from Insee, consumer price inflation in France quickened to 4.8% in August on an annual basis, from 4.3% in July. On a monthly basis, consumer prices rose by 1.0%, having risen 0.1% in July.

Meanwhile, data from Eurostat showed that inflation in the wider eurozone remained stable annually in August, and unemployment held steady in July.

According to a flash estimate, the euro area's annual inflation rate is expected to be 5.3% in August, stable compared to July. Markets had been expecting consumer prices to cool slightly to 5.1%, however, according to FXStreet market consensus.

In July, the euro area's seasonally-adjusted unemployment rate was 6.4%, stable when compared with June and down from 6.7% in July last year. This is in line with market expectations.

Brent oil was quoted at USD85.65 a barrel at midday in London on Thursday, up from USD84.70 late Wednesday. Gold was quoted at USD1,944.35 an ounce, slightly lower against USD1,945.03.

Still to come on Thursday's economic calendar, the US weekly unemployment claims report will be published at 1330 BST.

By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [email protected]

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