11th Oct 2023 12:10
(Alliance News) - Stock prices in London were largely lower at midday on Wednesday, as investors nervously eyed two key pieces of US inflation data, though the FTSE 100 pushed higher thanks to gains amongst its utility stocks.
The FTSE 100 index was up 13.51 points, or 0.2%, at 7,641.72. Meanwhile, the FTSE 250 was down 74.52 points, or 0.4%, at 17,893.15, and the AIM All-Share was down 1.52 points, or 0.2%, at 696.57.
The Cboe UK 100 was up 0.1% at 763.00, the Cboe UK 250 was down 0.4% at 15,584.86, and the Cboe Small Companies was marginally higher at 13,263.95.
The latest US producer price index reading will be released at 1330 BST on Wednesday. A consumer price index print will follow a day later.
Russ Mould, investment director at AJ Bell, said the prints will be a "test" of the US Federal Reserve's "sanguine attitude" amid "continuing noises" within the US central bank that the need to hike interest rates has gone.
"Producer prices are often a leading indicator of increases in the cost of consumer goods and therefore are a canary in the coal mine for any resurgence in inflationary pressures," he explained.
According to FXStreet-cited consensus, markets are expecting producer price inflation to rise 1.6% on an annual basis in September, unchanged from August. Meanwhile, consumer price inflation is expected cool to 3.6% on an annual basis in September, from 3.7% in August.
Should the prints come in hotter than expected, they could throw cold water on hopes that interest rates in the world's largest economy have hit their peak.
In London, utility stocks were among the top performers in the FTSE 100 at midday on Wednesday. United Utilities, Severn Trent and SSE were all up 1.1%, while Centrica and National Grid were up 0.6% and 0.8%, respectively.
Meanwhile, rating near the bottom of the blue-chip index was Burberry, down 2.9% at midday. The stock was knocked in a negative read-across from LVMH, which was down 6.2% in Paris.
LVMH was the first of the major luxury retailers to report on its quarterly trading on Tuesday, and said its growth had slowed considerably in the third-quarter of the year amid tricky market conditions.
The company reported total revenue in the third-quarter of 2023 amounted to EUR19.96 billion, representing organic growth of 9% on-year. Progress slowed from a 17% year-on-year rise in each of the first and second quarters, however.
Pierre Veyret, technical analyst at ActivTrades, said the weaker-than-expected results kicked off the new earnings season on a "less optimistic foot than many were hoping" and weighed heavily on the CAC 40 in Paris which fell 0.5% on Wednesday afternoon.
Elsewhere in European equities, the DAX 40 in Frankfurt was 0.1% higher after final figures from the Federal Statistics Office confirmed that consumer price inflation in Germany cooled to its lowest level since the start of the war in Ukraine in September.
The consumer price index rose by 4.5% in September from a year before, slowing from a 6.1% annual increase in August and confirming an earlier estimate.
In the FTSE 250, FirstGroup jumped 3.9% after it reported that passenger demand was stronger than anticipated during its first half of its financial and said its annual operating profit could be up to GBP20 million higher than expected as a result.
The transport company said increased leisure travel during summer caused demand for its First Rail open access operations to be stronger than previously expected. Meanwhile in its First Bus division, FirstGroup said trading was slightly ahead of expectations throughout the half year that ended September 30.
Consequently, FirstGroup expects adjusted operating profit to be around GBP14 million to GBP20 million higher than anticipated, with adjusted attributable profit around GBP7 million to GBP10 million higher.
In the financial year that ended March 25, adjusted operating profit was GBP161.0 million for FirstGroup, while adjusted attributable profit was GBP82.1 million.
Elsewhere in London, Marston's lost 4.3% despite the pub chain reporting a 11% rise in retail sales in the year ended September 30 after a wet mid-summer in the UK gave way to a fine September.
On the cost side, Marston's said it has fixed its energy costs for financial 2024, as well as a "significant proportion" of its food and drink costs. The company also has reduced head office staff costs by GBP5 million, the benefit of which mostly will be in financial 2024 and beyond.
Marston's is targeting at least a 200 basis points improvement in profit margin over the next two to three years, with 50 points of this coming from the cost cuts it already has made.
"Two years ago, we set out our vision and strategy with a clear objective to create a simplified, high quality predominately suburban pub business, with minimal exposure to city centres where demand is more volatile," Chief Executive Officer Andrew Andrea said, adding: "The benefits of this strategy are now coming through."
On AIM, Eneraqua Technologies plunged 57% after the energy and water efficiency solution provider announced it had swung to an interim loss, amid rising costs, and warned of a "material reduction" in profitability in the full-year.
The firm swung to a pretax loss of GBP441,000 in the six months ended July 31, from a profit of GBP3.0 million the year prior, as it recorded a 20% rise in its cost of sales and a 31% rise in administrative expenses. The higher costs offset revenue growth of 7.4% to GBP26.0 million.
Chief Executive Mitesh Dhanak warned that the company is facing dual headwinds moving forward: "continued and increased" budgetary pressures on local government and "unexpected" UK government policy change in relation to net nutrient neutrality.
These headwinds were leading to discussions on slowing down project delivery and deferring works into the next financial year, the CEO explained. As a result of this, the company now expects to see a "material reduction" in revenue and outturn in profitability during financial 2024.
Stocks in New York were called higher on Wednesday. The Dow Jones Industrial Average was called up 0.2%, the S&P 500 index up 0.2%, and the Nasdaq Composite up 0.3%.
German sandals maker Birkenstock will debut on the New York stock exchange Wednesday with a valuation of USD8.6 billion. Birkenstock has set its share price at USD46. A total of 32.26 million ordinary shares will be offered in its initial public offering, trading under the symbol BIRK.
The stock flotation marks a new milestone, just two years after the Birkenstock heirs sold a majority stake to private equity group L Catterton and the family holding fund of French luxury magnate Bernard Arnault.
The pound was quoted at USD1.2285 at midday on Wednesday in London, up from USD1.2270 at the London equities close on Tuesday. The euro stood at USD1.0602, virtually unchanged against USD1.0606. Against the yen, the dollar was trading at JPY148.69, lower compared to JPY148.74.
Brent oil was quoted at USD87.42 a barrel midday Wednesday in London, down from USD87.50 at the London equities close on Tuesday. Gold was quoted at USD1,873.63 an ounce, higher against USD1,859.73.
Still to come in economic calendar, the US Federal Reserve's September meeting minutes will be published at 1900 BST.
By Heather Rydings, Alliance News senior economics reporter
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