LONDON MARKET CLOSE: Stocks retreat as inflation concerns persist

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Stocks in London began the month of June on the backfoot on Wednesday, as investors show a distinct lack of jubilation ahead of the long weekend, after the day's global economic data fed concerns over interest rates and inflation.

The FTSE 100 index closed down 74.71 points, or 1.0%, at 7,532.95. The mid-cap FTSE 250 index closed down 145.05 points, or 0.7%, at 20,272.90. The AIM All-Share index closed down 3.14 points, or 0.3%, at 972.60.

The Cboe UK 100 index closed down 0.9% at 749.82. The Cboe 250 ended down 0.6% at 17,967.78 and the Cboe Small Companies finished 0.3% higher at 14,657.51.

In mainland Europe, the CAC 40 stock index in Paris closed down 0.8%, while the DAX 40 in Frankfurt ended down 0.3%.

‘By the time investors have returned after the [jubilee] festivities they could be facing a big hangover depending on the turn Wall Street takes over the next few days and the latest US jobs reading due on Friday. Inflationary concerns look set to continue to dominate the market mood,’ said AJ Bell's Russ Mould.

In the FTSE 100, GSK closed down 1.6%. The drugmaker said it has submitted to the UK Financial Conduct Authority its plan for the demerger of its consumer healthcare arm and its listing in London and New York as Haleon.

The separation will take the form of a demerger of at least 80% of GSK's current 68% share of the consumer business to GSK shareholders. The remaining 32% of Consumer Healthcare currently is held by US peer Pfizer.

Pfizer was down 2.0% in New York.

Following the float, GSK shareholders will own 54.5% of Haleon, while GSK's UK pension schemes will have 7.5%. GSK itself will retain up to 6%, but GSK said Pfizer intends to sell off its 32% stake in Haleon ‘in a disciplined manner, with the objective of maximising value for Pfizer shareholders’.

Haleon will be listed as ordinary shares in London and as American depositary shares on the New York Stock Exchange.

In the FTSE 250, Dr Martens ended the star performer, up 20%, after the iconic bootmaker posted annual earnings ahead of market expectations.

For the financial year that ended March 31, pretax profit surged to £214.3 million from £69.7 million the year prior. Revenue rose to £908.3 million from £773.0 million.

Dr Martens declared an annual dividend of 5.5 pence, compared to none the year before.

Capricorn Energy ended up 1.9% after it agreed to an all-share merger with fellow FTSE 250 energy firm Tullow Oil.

Tullow closed down 2.0%.

Under the deal terms, Capricorn shareholders will receive 3.8068 new Tullow shares for each Tullow share, giving Capricorn shareholders 47% of the enlarged firm.

Tullow Oil has a market cap of about £769 million, while Capricorn - formerly known as Cairn Energy - has a market cap of about £644 million.

‘The boards of Tullow and Capricorn believe the combination has compelling strategic, operational and financial rationale, with the ability to deliver substantial benefits to shareholders, host nations and other stakeholders,’ Tullow said in the statement.

‘The combination represents a unique opportunity to create a leading African energy company, listed in London, with the financial flexibility and human resource capability to access and accelerate near-term organic growth, add new reserves and resources cost-effectively, generate significant future returns for shareholders, and pursue further consolidation’.

The pair guided for pre-financing free cash flows of $2.4 billion from 2022 to 2025 following the merger.

The pound was quoted at $1.2490 at the London equities close, down sharply from $1.2605 at the close Tuesday.

Sterling found little support after the manufacturing sector in the UK saw growth slow in May, with a hit to demand leading to a seven-month low in output.

The seasonally adjusted S&P Global-CIPS UK manufacturing purchasing managers' index posted 54.6 points in May, unchanged from the earlier flash estimate and down from 55.8 in April.

The reading was in line with market forecasts, cited by FXStreet. S&P noted the sector was hit by falling output, new orders and employment.

The euro stood at $1.0655 at the European equities close, down from $1.0722 late Tuesday.

On the continent, a reading on the health of the eurozone manufacturing sector fell to its lowest reading for 18 months in May, final survey data revealed.

The S&P Global eurozone manufacturing purchasing managers' index fell to 54.6 points in May from 55.5 in April, signalling a weaker improvement in the health of the euro area's manufacturing sector.

However, for Germany, the PMI score saw a slight improvement from the 20-month low registered in April.

The headline seasonally adjusted PMI inched up to 54.8 points in May from 54.6 the month prior. The survey indicated a sustained softening of demand for German manufactured goods, with a combination of heightened economic uncertainty and sharply rising prices. In addition, Covid-related lockdowns in China led to a further decline in new orders.

Against the yen, the dollar was trading at JP¥129.95, up sharply from JP¥128.50 late Tuesday.

Stocks in New York were lower at the London equities close as worries about an aggressive tightening to rein on decades-high inflation and the economic slowdown continued to grip Wall Street

The DJIA was down 0.5%, the S&P 500 index down 0.6% and the Nasdaq Composite down 0.1%.

On Wall Street, Dow member Salesforce rocketed 13% higher after the software provider reported better-than-expected earnings and said consumer demand was robust.

Brent oil was quoted at $117.23 a barrel at the equities close, sinking from $123.75 at the close Tuesday.

Oil prices remained under pressure after the Wall Street Journal Tuesday reported that some OPEC members are exploring the idea of suspending Russia's participation in an oil-production deal as Western sanctions and a partial European ban begin to undercut Moscow's ability to pump more.

Meanwhile, ministers from OPEC+, which groups the Organization of the Petroleum Exporting Countries, Russia and others, meet on Thursday to discuss oil output policy and are expected to confirm a previously agreed increase in oil production.

Gold stood at $1,843.12 an ounce at the London equities close, slightly lower against $1,845.51 late Tuesday.

The economic events calendar on Thursday has eurozone producer prices at 1000 BST and the latest US jobless claims numbers at 1330 BST. Financial markets in the UK will be closed on Thursday for the Spring Bank Holiday and on Friday for the Platinum Jubilee.

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