LONDON MARKET MIDDAY: Pound, oil and stocks down ahead of Fed remarks

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London market participants were pulling back some of the week's price gains on Wednesday, after confirmation that UK inflation continues to run hot.

Investors also were positioning themselves ahead of two days of testimony before US legislators by Jerome Powell. The Federal Reserve chair will answer questions from the Senate Banking Committee on Wednesday and the House Financial Services Committee on Thursday.

Last week, Powell and his fellow policymakers hiked US interest rates by three quarters of a percentage point.

The FTSE 100 index was down 101.56 points, or 1.4%, at 7,050.49 midday Wednesday.

The mid-cap FTSE 250 index was down 280.95 points, or 1.5%, at 18,668.10. The AIM All-Share index was down 9.97 points, or 1.1%, at 888.43.

The Cboe UK 100 index was down 1.4% at 702.80. The Cboe 250 was down 1.6% at 16,394.56, and the Cboe Small Companies down 0.8% at 13,619.18.

In mainland Europe, the CAC 40 in Paris was down 1.7%, while the DAX 40 in Frankfurt was down 2.0%.

After a strong start to the week, European stocks snapped their winning streak, as focus turned once again to inflation, central banks, and recession risks.

‘Investors will need to see compelling evidence that inflation is cooling before we see a turnaround in market sentiment, in our view,’ said UBS.

Traders may be waiting some months longer to see peak inflation in the UK, after data early Wednesday showed annual consumer price growth accelerated to 9.1% in May from 9.0% in April.

This was in line with market consensus, according to FXStreet.

It was the highest 12-month inflation rate in the National Statistic series, which began in January 1997, the Office for National Statistics said. Indicative modelled consumer price index inflation estimates suggest that it would last have been higher around 1982, the ONS said.

With energy prices set for another sharp rise in the autumn after regulator Ofgem's review of household rates and the Bank of England recently warning inflation will breach the 11% threshold in October, prices are expected to remain elevated in the short-term.

The pound was quoted at $1.2255 Wednesday, down from $1.2276 at the London equities close on Tuesday despite the uptick in inflation.

‘Sterling slipped to a near one-week low against the US dollar this morning, as ongoing concerns over the UK's cost of living crisis continued to damp sentiment towards the currency,’ said Matthew Ryan, head of strategy at Ebury.

The euro traded at $1.0493 on Wednesday in London, lower than $1.0568 late Tuesday. Against the yen, the dollar was quoted at JP¥136.32, up versus JP¥136.18.

Gold was quoted at $1,828.67 an ounce, down from $1,839.99 on Tuesday.

Stocks in New York were on course for a lower open as well. The Dow Jones was pointed down 1.2%, the S&P 6500 down 1.4% and the Nasdaq Composite down 1.6%.

Weighing on the FTSE 100 was Berkeley, down 6.6% despite reporting a higher annual profit, citing its stable operating model in an uncertain period.

The Surrey-based housebuilder said pretax profit for the financial year that ended April 30 rose 6.4% to £551.5 million from £518.1 million, with revenue up 6.6% to £2.35 billion from £2.20 billion.

Berkeley has seen a ‘stable’ start to the new financial year, it said, with enquiries, visitor numbers and reservations in line with the end of the 2022 financial year.

The results from Berkeley came as data showed the average UK house price was £31,000 higher in April than a year earlier. Across the UK, the typical property value in April stood at £281,000 in April, which was 12% higher than a year earlier.

Some property professionals pointed to more recent figures indicating a softening in the UK housing market. They also highlighted a nervousness about taking on debt when it is unclear when the living costs surge will start to level out.

Shell and BP fell 3.9% and 3.4% respectively as oil prices fell. Brent oil was trading at $109.71 a barrel, dropping from $114.71 late Tuesday amid concern about global energy demand.

JD Sports rose 4.8% as it released its delayed annual results which showed the athleisure retailer booked a record performance in its recently ended financial year but warned that further growth would be held back by global volatility.

For the year ended January 29, the FTSE 100 listed firm doubled pretax profit to £654.7 million from £324.0 million the year prior. Pretax profit before exceptional items more than doubled to £947.2 million from £421.3 million.

The record profit came on revenue that grew 39% to £8.56 billion from £6.17 billion.

NatWest shares were up 3.8% after the UK government said it will continue to sell down its stake in the bank for another year.

The trading plan unveiled last July will be extended for a further 12-month term and will now terminate no later than August 11, 2023.

Since the plan was established, the UK Treasury has sold 703.5 million shares for £1.6 billion, it said. This implies an average sale price per share of around 227p, well below the 502p paid to bail out NatWest, then Royal Bank of Scotland Group, in 2008.

In addition, Jefferies upgraded NatWest to Buy from Hold.

In the FTSE 250, Micro Focus dropped 18% as it narrowed its half-year loss, though posted a fall in revenue and reduced its dividend.

For the year ended April 30, sales slid 8.7% to $1.27 billion from $1.39 billion a year before.

Its pretax loss narrowed to $42.9 million from $280.0 million on reduced costs, but adjusted earnings before interest, tax, depreciation and amortisation fell 12% to $449 million from a constant-currency year-earlier figure of $510.7 million.

As a result, Micro Focus cut its interim dividend to 8 cents per share from 8.8 cents.

By Lucy Heming; lucyheming@alliancenews.com

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