10th Mar 2021 08:42
(Alliance News) -Â London stocks were in the red early on Wednesday as markets brace for this afternoon's US inflation print.
"Today's US CPI release will be watched with particular interest by markets considering that concerns about a quicker-than-expected rebound in inflation continue to weigh on the US bond market," said Lloyds Banking.
"The CPI is not the Fed's preferred inflation measure; that is the consumer expenditure deflator. However, as the February reading for that will not be released until the 26th March, the CPI will as always be seen as a timelier reading of inflationary pressures."
As well as US inflation, markets are also awaiting the passage of US President Joe Biden's USD1.9 trillion stimulus plan, with a final vote scheduled for Wednesday.
The FTSE 100 index was down 30.08 points, or 0.5%, at 6,700.26 early Wednesday. The mid-cap FTSE 250 index was down 97.00 points, or 0.5%, at 21,285.47. The AIM All-Share index was down 0.4% at 1,178.68.
The Cboe UK 100 index was down 0.7% at 667.35. The Cboe 250 was down 0.7% at 18,992.27, and the Cboe Small Companies down 0.1% at 13,748.07.
In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both down 0.1% early Wednesday.
Europe got off to a slow start on Wednesday ahead of the keenly awaited US inflation figures at 1330 GMT. The annual inflation rate is seen picking up to 1.7% in February from 1.4% in January, according to FXStreet.
"The data may reinforce the concerns and qualms that investors have about inflation. For the last two months, we have already seen Treasury yields rising at an alarming pace, and if today's number comes in with a strong reading, a highly likely scenario, we could see the 10-year Treasury yields soaring even further," said Naeem Aslam, chief market analyst at AvaTrade.
The dollar was stronger ahead of the inflation reading. Against the yen, the dollar rose to JPY108.83 versus JPY108.70.
Sterling was quoted at USD1.3877 early Wednesday, falling from USD1.3900 at the London equities close on Tuesday. The euro traded at USD1.1874 early Wednesday, soft on USD1.1888 late Tuesday.
At the top of London's FTSE 100 in early trade was Spirax-Sarco Engineering, rising 4.0% after saying its fourth quarter was better than expected, with full-year profit nudging up.
Revenue for 2020 fell 4% to GBP1.19 billion, though pretax profit edged up 1% to GBP240.1 million, as the thermal energy management and pumping firm's operating profit margin improved to 20.9% from 19.7%.
"Following a stronger-than-anticipated fourth quarter, we are very pleased with the group's performance in 2020, given the unprecedented circumstances caused by the Covid-19 pandemic," said Chief Executive Nicholas Anderson.
Spirax-Sarco reported strong organic sales and profit growth in Watson-Marlow, while organic sales for Steam Specialties declined broadly in line with industrial production across its global markets. In Electric Thermal Solutions, organic sales fell 12%. The latter two divisions still performed robustly given challenging market conditions, the company said.
"The excellent growth in Watson-Marlow was driven by the Pharmaceutical & Biotechnology sector, where demand accelerated due to Covid-19 vaccine development and production. The improved outlook for industrial production growth, strong order book, robust prospects for Watson-Marlow and continued investments leave us well-placed for 2021," said CEO Anderson.
Spirax-Sarco raised its dividend for the year by 7% to 118.0p.
Scottish Mortgage Investment Trust rose 2.1%, tracking the Nasdaq Composite's 3.7% rise overnight. Scottish Mortgage holds investments in tech stocks such as Amazon.com and Tesla, which ended up 3.8% and 20% respectively in New York on Tuesday.
Restaurant Group shares rose 8.8% even as the casual dining chain owner posted a sharply widened loss for 2020 and unveiled plans for a GBP175 million capital raise.
Revenue for 2020 more than halved to GBP459.8 million from GBP1.07 billion in 2019, while the owner of pan-Asian brand Wagamama posted a pretax loss of GBP127.6 million, widened from a GBP37.3 million loss the year before.
"Our reported results reflect that we have been closed for 'dine-in' in many of our restaurants for a very significant proportion of 2020," said Restaurant Group.
Positively though, in the periods when the company was allowed to trade for dine-in, Wagamama continued to deliver "exceptional" like-for-like sales growth, trading well ahead of management expectations.
The company said that the pandemic and associated restrictions are likely to hit its ability to reduce leverage organically or support selective growth opportunities in the medium term. As a result, it proposed a GBP175 million capital raise.
The proceeds will be used to improve liquidity headroom, accelerate deleveraging and strengthen the company's ability to capitalise on site expansion for Wagamama and its Pubs businesses.
The funds will be raised via a firm placing of 95.3 million shares and a placing and open offer of 79.7 million shares. The fundraise will be priced at 100 pence per share, which the company said marked an 11% discount to Tuesday's closing middle market price of 111.7p.
"The capital raising, announced today, will significantly strengthen the group's balance sheet and provides TRG with the flexibility to invest in growing our business. Whilst the sector outlook remains uncertain, and we are mindful of continuing restrictions across the UK, we are confident that the actions announced today will allow us to emerge as one of the long term winners," said Chief Executive Andy Hornby.
In Asia on Wednesday, the Japanese Nikkei 225 index closed flat.
In China, the Shanghai Composite also closed flat, while the Hang Seng index in Hong Kong ended up 0.5%.
Factory prices in China rose in February at the fastest pace in more than two years, official data showed Wednesday, as the country's vast industrial sector recovered from a coronavirus-induced slump.
The producer price index, which measures the cost of goods at the factory gate, rose 1.7% last month according to data from the National Bureau of Statistics, exceeding analysts' expectations. China's PPI had risen for the first time in a year in January, and February's rate was the fastest since November 2018.
Gold was quoted at USD1,710.76 an ounce early Wednesday, soft on USD1,713.01 on Tuesday. Brent oil was trading at USD66.70 a barrel, sinking from USD68.20 late Tuesday.
By Lucy Heming;Â [email protected]
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