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LONDON MARKET MIDDAY: Stocks down; UK inflation cools in July

16th Aug 2023 12:01

(Alliance News) - Stock prices in London were lower at midday on Wednesday, as investors digest some mixed inflation figures and the impact they will have on the Bank of England's next move.

The FTSE 100 index was down 18.63 points, 0.3%, at 7,371.01. The FTSE 250 was down 0.59 of a point at 18,659.16, and the AIM All-Share was down 1.86 points, 0.3%, at 748.07.

The Cboe UK 100 was down 0.3% at 734.97, the Cboe UK 250 was down 0.1% at 16,393.51, and the Cboe Small Companies was down 0.4% at 13,550.51.

The UK headline inflation figure cooled as expected last month but core inflation proved stubborn, figures from the Office for National Statistics showed on Wednesday.

Following the higher-than-expected wage inflation figures on Tuesday, the sticky core inflation reading suggests inflation is becoming more entrenched in the economy.

Annually, consumer prices rose by 6.8% in July, cooling from a 7.9% jump in June. July's reading was in line with market forecasts, as cited by FXStreet.

However, Hargreaves Lansdown's Susannah Streeter said: "When you strip out volatile food and fuel prices, which have fallen back more substantially, there has been no slowdown in rate of increases which is highly disappointing."

Core inflation - excluding energy, food, alcohol, and tobacco - was unchanged on an annual basis from June's reading of 6.9%. It had been expected to cool to 6.8%.

AJ Bell investment director Russ Mould said that the record wage growth revealed on Tuesday has created fears that inflation in the UK economy is becoming "increasingly entrenched." This is supported by the stickier core inflation.

Mould said that the BoE will be "glad of the breathing space provided by the scheduling of its next meeting." The bank will be due to make its next interest rate decision in late September.

"This will allow it to look at a few more data points before deciding its next move on interest rates. One thing is absolutely certain – the battle against inflation is far from over," he added.

The pound was up at midday on Wednesday. This indicates that the market believes the Bank of England is more likely to hike rates.

The pound was quoted at USD1.2743 at midday on Wednesday in London, compared to USD1.2733 at the equities close on Tuesday. It had strengthened from around USD1.2705 shortly before the inflation data.

Listed housebuilders succumbed to selling pressure, in anticipation of higher interest rates. Barratt Developments was down 0.9%, Taylor Wimpey down 0.6% and Persimmon was down 0.4%.

Elsewhere in the FTSE 100, insurers were topping in the index following positive interim results.

Admiral was up 5.2%, with insurance revenue climbing 14% to GBP1.61 billion in the first half of 2023 from GBP1.41 billion a year before. Turnover rose 21% to GBP2.24 billion from GBP1.85 billion. Pretax profit rose by 4.1% to GBP233.9 million from GBP224.6 million.

Despite the improved performance, Admiral cut its interim dividend to 51.0 pence per share from 60.0p the year before.

Aviva was up 2.3%. The London-based company said its interim IFRS post-tax profit was GBP377 million, compared to a loss of GBP198 million a year before. General insurance gross written premiums rose 12% to GBP5.27 billion from GBP4.69 billion.

The company declared an interim dividend of 11.1 pence per share, up 7.8% from 10.3p a year before. Aviva is aiming for a total 2023 dividend of 33.4p, up 7.7% from 31.0p in 2022.

Antofagasta lost 1.6%. RBC cut it to 'underperform' from 'sector perform'.

In the FTSE 250, Marks & Spencer rose 4.3%.

Credit Suisse, Goldman Sachs, Barclays and Deutsche Bank all raised price targets for M&S. Meanwhile, Numi raised it to 'add' from 'hold.'

On Tuesday, the clothing, homewares and food retailer shared an improved outlook for its financial year in an unscheduled trading update. M&S also said it has seen "continued market share growth" in Clothing & Home, as well as Food, in the first 19 weeks of its financial year.

On AIM, Belluscura shares jumped 17%. It had announced it received purchase orders for over 6,500 of its DISCOV-R portable oxygen concentrator.

The medical device developer focused on lightweight and portable oxygen enrichment technology said the order meant potential revenue of USD15 million as it expects production of the concentrator to start by the end of this quarter.

Tern lost 16%. The investment company specialising in supporting early-stage 'internet of things' technology businesses said in the six months to June 30, pretax loss widened 18% to GBP2.8 million from GBP2.4 million a year before.

Looking ahead, Tern said it is implementing cost saving measures, expecting to save about 40% of its overall central costs in 2024 compared to 2022.

In European equities on Wednesday, both the CAC 40 and the DAX 40 in Frankfurt were up 0.1%.

Eurozone industrial production rose by 0.5% in June from May, according to the latest figures from Eurostat on Wednesday.

In June, seasonally adjusted industrial production increased by 0.5%, compared with May, when it remained unchanged. On an annual basis, eurozone industrial production fell by 1.2%.

Also on Wednesday, Eurostat said that seasonally adjusted gross domestic product increased by 0.3% in the eurozone in the second quarter of 2023, compared to the first quarter. This preliminary flash estimate meets FXStreet consensus of 0.3%.

In the first quarter of 2023, GDP had fallen by 0.1% in the eurozone quarter-on-quarter.

Stocks in New York were called higher. The Dow Jones Industrial Average and the S&P 500 index were both called up marginally. The Nasdaq Composite was called up 0.1%.

The euro stood at USD1.0927, virtually unchanged against USD1.0926 at London's equity close on Tuesday. Against the yen, the dollar was trading at JPY145.57, higher compared to JPY145.40.

Brent oil was quoted at USD84.73 a barrel at midday in London on Wednesday, down from USD84.79 late Tuesday. Gold was quoted at USD1,906.51 an ounce, lower against USD1,907.15.

Still to come on Wednesday's economic calendar, minutes from the Federal Reserve's most recent meeting are released at 1900 BST.

By Sophie Rose, Alliance News reporter

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