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LONDON MARKET MIDDAY: Dollar and stocks poised for US inflation report

European market participants spent Wednesday morning positioning for the US consumer price index reading due before the New York open, but that left major stock indices essentially unchanged.

In London, corporate earnings were the focus ahead of the inflation report. UK insurers Admiral and Aviva led the FTSE 100 as the pair delivered shareholder payouts despite battling elevated claims inflation, citing pricing discipline.

The FTSE 100 was up just 6.12 points, or 0.1%, at 7,494.27 midday Wednesday. The FTSE 250 index was up 56.02 points, or 0.3%, at 19,968.42. The AIM All-Share index was down 2.46 points, or 0.3%, at 912.29.

The Cboe UK 100 index was flat at 747.81. The Cboe 250 was up 0.2% at 17,312.10. The Cboe Small Companies was down 0.1% at 14,280.27.

In Paris, the CAC 40 stock index was up slightly, while in Frankfurt, the DAX 40 was up 0.2%.

Looking ahead to the open in New York, the Dow Jones Industrial Average and S&P 500 index were both called up 0.2%, while the Nasdaq Composite was seen opening 0.3% higher.

‘All eyes will be on US inflation data released later today as this could have a major influence on the direction of the stock market. A higher-than-expected figure could weigh on equities as investors have simply had enough of the rising cost of living,’ AJ Bell analyst Danni Hewson said.

The US inflation print due is at 1330 BST, an hour before the open on Wall Street.

Consensus, according to FXStreet, expects the US annual consumer price inflation rate to have eased to 8.7% in July from 9.1% in June. The core rate, however, is seen ticking up to 6.1% from 5.9%.

Ricardo Evangelista, senior analyst at ActivTrades, said: ‘A confirmation of this scenario doesn't mean that the Fed will suddenly pivot to a more dovish stance, as inflation will remain well above the ideal level.

‘What it does mean is that the impact on the dollar will be minimal, with an alignment between market expectations and the likely path of the central bank's dot plot. On the other hand, a surprisingly high inflation number could lead to investors pricing in an even more aggressive Fed, in a dynamic that would further strengthen the US dollar.’

The pound was quoted at $1.2088 midday Wednesday, hardly budged from $1.2086 at the London equities close Tuesday

The euro stood at $1.0225, also flat from $1.0223 at the European equities close Tuesday. Against the yen, the dollar was trading at JP¥134.93, marginally down on JP¥134.96 late Tuesday.

‘We maintain our strong dollar call but profess disappointment that it has not been able to move much higher after last week’s perfect mix of hawkish Fed officials and strong US data,’ said Win Thin, global head of currency strategy at Brown Brothers Harriman.

In London, Endeavour Mining gained 2.4% after UBS started its coverage of the stock at 'buy'.

At the top of the large-caps, Aviva advanced 9.6%. The insurer reported an ‘excellent’ first half and reiterated it is confident of meeting annual targets.

In the six months to June 30, its IFRS loss widened to £633 million from a £198 million loss a year prior. Aviva explained that this ‘largely’ reflects adverse market movements and has no impact on capital or cash remittances. Adjusted operating profit rose 14% to £829 million from £725 million.

Aviva declared an interim dividend of 10.3p per share, lifted 40% from 7.35p a year earlier, in line with its full-year guidance of around 31.0p per share.

Peer Prudential also reported early Wednesday. Its shares were down 0.2%. It labelled its first-half performance as resilient, though the Asia-focused insurer said it faced tough macro conditions and Covid-19 disruption.

Car and home insurer Admiral added 5.9%.

The share price gains came despite a first-half profit fall, hurt by accelerating claims inflation in its motor insurance arm.

Revenue in the six months to June 30 rose 5.7% year-on-year to £1.85 billion from £1.75 billion. Total UK premiums written, which comprises its motor, home and travel insurance units, was 2.8% higher year-on-year at £1.27 billion from £1.23 billion.

Group pretax profit fell 48% year-on-year to £251.3 million from £482.2 million. Compared to pre-Covid times, however, pretax profit was up 19%. Pretax profit was in line with consensus, broker Peel Hunt noted.

Admiral reported a first-half combined ratio of 96.7%, worsening from 75.2% a year earlier. The higher figure shows Admiral is making less profit from its underwriting operations.

Admiral declared a 60.0p per share ordinary interim dividend, down 48% from 115.0p a year prior. Including special dividends, stemming from the sale of its Penguin Portals comparison site, the total interim dividend was down 35% at 105.0p. The special dividend linked with the disposal amounted to 45p in the first half of 2022, down a touch from 46p a year earlier.

4imprint Group was the best performer among London midcaps, up 13%.

The marketer of promotional merchandise, for the 26 weeks to July 2, saw pretax profit multiply to $43.9 million from $3.4 million.

Revenue jumped 58% to $515.5 million from $326.8 million. 4imprint said its total orders processed rose to 886,000 from 616,000 the year before.

It upped its interim dividend to 40 US cents from 15 cents.

TP ICAP shares gained 10%. The interdealer broker saw revenue grow across its asset classes in the first half, leading to a nice bump in dividend.

For the six months that ended on June 30, the London-based financial services firm said pretax profit more than doubled to £72 million from £28 million. Revenue rose by 15% to £1.08 billion from £936 million, led by a strong performance in Rates.

Global broking revenue was at £636 million, up 8% from £589 million a year ago, with TP ICAP saying all asset classes generated revenue uplift. Global broking revenue per broker increased 14%.

TP ICAP upped its dividend by 13% to 4.5 pence per share from 4.0p a year prior.

Looking ahead, the company said its July revenue was up 1.0% compared to a year ago at constant currency.

At the bottom end of the midcaps, Quilter lost 5.4%.

The London-based wealth manager reported a single-digit rise in profit in the first half characterised by heightened global market volatility and ‘extremely challenging’ conditions.

Quilter posted a 8.9% increase in adjusted pretax profit to £61 million for six months to June 30 from £56 million in the prior year. Total net fee revenue was virtually unchanged at of £303 million from £304 million.

The interim dividend was held at 1.2 pence.

For the interim period, assets under management and administration were 12% lower at £98.7 billion as at June 30 from £111.8 million as at December 31, principally due to adverse market movements of £14.5 billion, which offset net inflows.

Net inflows slowed by 30% to £1.4 billion from £2.0 billion.

Gold was quoted at $1,794.20 midday Wednesday, rising from $1,793.82 an ounce at the London equities close Tuesday.

Brent oil was quoted at $95.35 a barrel, down from $97.62 a barrel at the London equities close Tuesday.

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