LONDON MARKET MIDDAY: Shares end positive run; Pearson called 'sell'

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London shares were on track to end a three-day winning streak at midday on Wednesday, as concerns about inflation and weakening economies returned to centre of attention, amid disturbing economic indicators and a central bank gathering in Portugal.

The FTSE 100 index was down 39.78 points, or 0.5%, at 7,283.58. The FTSE 250 index was down 320.80 points, or 1.7%, at 19,030.47. The AIM All-Share index was down 10.24 points, or 1.1%, at 897.37.

The Cboe UK 100 index was down 0.6% at 726.41. The Cboe 250 was down 1.7% at 16,655.25, and the Cboe Small Companies was down 0.2% at 13,552.87.

In mainland Europe, the CAC 40 stock index in Paris was down 1.4%, while the DAX 40 in Frankfurt was down 1.9%.

In the FTSE 100, B&M European Value Retail was the best performer, up 2.1%. The variety goods retailer said revenue declined in its financial first-quarter, but it still left its annual guidance unchanged.

For the 13 weeks to June 25, group revenue was down 2.2% to £1.16 billion from £1.19 billion in the first quarter last year. For B&M UK, revenue was down to £957 million from £1.02 billion.

B&M said, however, that it had seen an ‘improving trend’ in revenue during the quarter. Further, it explained that B&M UK had exceptionally high sales in April 2021, thus distorting the comparison.

Looking ahead, B&M said there is no change to the guidance issued at its annual results in May, with financial 2023 adjusted earnings before interest, tax, depreciation, and amortisation expected to be in the range of £550 million to £600 million. Adjusted Ebitda in financial 2022 came in at £619 million.

Oil stocks BP, Shell and Harbour Energy were up 1.4%, 1.1% and 0.8% respectively, tracking spot oil prices higher. The three stocks had added 1.4%, 3.1% and 3.3% on Tuesday.

Brent oil was quoted at $118.23 a barrel Wednesday at midday, up from $117.21 late Tuesday.

OPEC members are meeting on Wednesday, with a production policy meeting involving the wider OPEC+ group set for Thursday.

Meggitt was up 0.6%. UK Secretary of State for Business, Energy & Industrial Strategy Kwasi Kwarteng is ‘minded to accept’ Parker-Hannifin's proposed undertakings on competition and national security matters to allow its acquisition of the defence contractor.

Late Tuesday, the UK government said Parker-Hannifin, a Cleveland-Ohio based engineering and aerospace company, has addressed competition and national security concerns over its £6.3 billion takeover of Coventry, England-based peer Meggitt.

‘The business secretary is minded to accept undertakings offered by Parker-Hannifin to address the concerns. This decision follows advice from the Ministry of Defence and the Competition & Markets Authority,’ the UK government said.

The government added that Business Secretary Kwarteng proposes to accept Parker's undertakings but has launched public consultations and will wait until the consultation period concludes on July 13 before making a final decision.

National Grid was up 0.7%. UK energy regulator Ofgem set out its price control plan for the next five years, saying most consumers could see a small drop in costs related to electricity network charges.

In response, power utility SSE called Ofgem's initial determination ‘tough and stretching’. It said it will review the plan and engage with Ofgem ahead of its final determination.

SSE was down 1.8%.

National Grid also said it will work with Ofgem in the coming months, saying final determinations are expected in December.

Ofgem noted the average customer in the UK pays £100 per year toward the costs of operating local grids, which is in addition to what they pay for the electricity itself.

At the other end of the large-caps, British Land and Land Securities were down 7.5% and 4.9% respectively. Bank of America downgraded both property companies to 'underperform' from 'neutral'.

Pearson was down 4.9% after UBS cut the education publishing house to 'sell' from 'neutral'.

In the FTSE 250, Domino's Pizza was down 6.5% after Whitbread named the pizza delivery chain's CEO, Dominic Paul, as its new chief executive, as incumbent Alison Brittain plans to retire after seven years leading Whitbread. Shares in Whitbread were down 1.7%.

The dollar was higher across the board. The pound was quoted at $1.2181 at midday on Wednesday, down from $1.2191 at the London equities close Tuesday.

The euro was priced at $1.0522, down from $1.0531. Against the yen, the dollar was trading at JP¥136.40 in London, higher against JP¥136.22.

On the economic front, consumer price inflation in Spain hit double digits in June, preliminary data from the National Institute of Statistics showed.

Annually, the consumer price index surged 10.2% in June, accelerating from the 8.7% increase seen in May. INE noted that if June's inflation holds true, it will be the highest rise seen since April 1985. Market consensus, cited by FXStreet, had predicted a 9% rise.

‘The increase is much stronger than expected, which increases the pressure on the ECB to tighten monetary policy more decisively. At yesterday's ECB forum in Sintra, Portugal, President Christine Lagarde confirmed that the central bank will stick to its approach of raising interest rates by 25 basis points in July. If the rise in other eurozone countries is also much stronger than expected, it will increase the pressure on the ECB for a more substantial rate hike in July,’ said economists at ING.

Gold stood at $1,821.35 an ounce, slightly higher against $1,820.14 late Tuesday.

New York was pointed to a lower open on Wednesday, extending losses from a sharp sell-off on Tuesday after a dire US consumer confidence reading.

The Dow Jones Industrial Average was called down 0.1%, the S&P 500 down 0.3%, and the Nasdaq Composite down 0.4%. The indices had lost 1.6%, 2.0% and 3.0% respectively on Tuesday.

The economic events calendar on Wednesday has US GDP at 1330 BST. In addition, market focus will be on remarks from US Federal Reserve Chair Jerome Powell, Bank of England Governor Andrew Bailey and European Central Bank President Christine Lagarde in Sintra, where they will take part in a panel at 1400 UK time.

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