LONDON MARKET CLOSE: Stocks slip on slower US inflation readings

(Alliance News) - Stocks in London ended lower on Tuesday as investors digest the latest US ...

Alliance News 14 September, 2021 | 5:03PM
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(Alliance News) - Stocks in London ended lower on Tuesday as investors digest the latest US inflation figures which showed a slightly slower increase in August.

The FTSE 100 index ended down 34.11 points, or 0.5%, at 7,034.32. The mid-cap FTSE 250 index closed down 88.47 points, or 0.4%, at 23,687.26. The AIM All-Share index lost 7.31 points, or 0.6%, to 1,278.42.

The Cboe UK 100 index ended down 0.5% at 699.90. The Cboe 250 ended down 0.4% at 21,457.60, and the Cboe Small Companies lost 0.3% to 15,484.40.

In Paris, the CAC 40 stock index ended down 0.4%, while the DAX 30 in Frankfurt ended up 0.1%.

CMC Markets analyst Michael Hewson explained: "Having got off to a positive start yesterday, today's price action looks set to follow the pattern of last week, where after a similar Monday rally, sentiment deteriorated as concerns about profit margins in the face of rising prices saw certain sectors come under further pressure.

"Bond yields have also come under pressure over concerns that the weak US CPI number has been driven by demand deterioration, thus raising concerns about the global recovery story as we head into the fourth quarter. This has resulted in a mixed session for European markets."

Stocks in New York were lower at the London equities close as investors weighed tax uncertainty against data that showed a moderation in US consumer prices.

The DJIA was down 0.6%, the S&P 500 index down 0.4% and the Nasdaq Composite down 0.3%.

According to the Bureau of Labor Statistics, the US consumer price index rose by 5.3% in August from a year before, cooling from a 5.4% inflation rate in July. The figure was in line with consensus cited by FXStreet. It is the fourth month in succession that the inflation rate has been at 5% or above, having come in at 5.4% in June as well and at 5.0% in May.

On a monthly basis, prices grew by 0.3% in August, undershooting estimates of a 0.4% climb, following a 0.5% hike in July from June.

Investors have fretted over accelerating inflation in recent weeks and months, amid fears that a rise in prices will prompt central banks, such as the US Federal Reserve, to scale back economic stimulus measures.

Market participants were also monitoring the latest movements on Capitol Hill, including a Democratic proposal to lift taxes on the wealthy and on large companies.

In the FTSE 100, JD Sports Fashion ended the standout performer, up 9.7%. The athletic apparel retailer reported bumper sales in the first half of 2021, benefiting from pent-up demand as pandemic restrictions eased.

Revenue in the six months to July 30 was GBP3.89 billion, up 53% from GBP2.54 billion a year earlier, while pretax profit surged to GBP364.6 million from GBP41.5 million.

JD Sports declared no interim dividend for the first-half, but tipped a "potentially larger final dividend" could come, depending on its fortunes in the remainder of its financial year.

Bunzl closed up 1.4% after the distribution firm agreed to acquire US-based safety business McCue Corp and Australia-focused medical supplier MedShop.

Bunzl didn't provide the price of either acquisition but said it has spent a total of GBP390 million on ten purchases in the year to date. This is up from the GBP134 million it had said it had spent by the half-year stage.

At the other end of the large-caps, International Consolidated Airlines Group ended the worst performer, down 4.2%, after Exane BNP downgraded the British Airways parent to Neutral from Outperform.

Miners were Anglo American, BHP, Antofagasta and Rio Tinto ended down 3.1%, 2.6%, 2.1% and 2.0% respectively, as commodity prices weakened. In addition, iron ore pellet producer Ferrexpo ended the worst FTSE 250 performer, down 9.4%.

"The prospect of lower inflation pressures has sparked a fresh move lower for commodity prices today. Sharp declines across the likes of Palladium, Iron Ore, Platinum, and Copper have sent miners lower, to the detriment of UK markets in particular. Bulls will hope that [president] Joe Biden's plan to ramp up infrastructure spending will help drive asset prices upwards once again. However, with Chinese growth slowing, we are starting to see some of the upside throughout the sector ease somewhat," said IG Group's Josh Mahony.

Ocado Group lost 0.7% after the online grocer said revenue in its retail joint venture with Marks & Spencer Group fell in the third quarter after the fire at one of its distribution centres, and warned of rising labour costs.

M&S shares ended up 0.2%.

Revenue at Ocado Retail dropped 11% in the third quarter of the financial year ending November 30, to GBP517.5 million from GBP578.8 million a year before. Average orders per week rose 1.4% to 338,000 from 333,000 a year earlier. Compared to the third quarter of 2019, revenue increased 38%, Ocado said.

The disruption cost Ocado Retail was around GBP35 million in sales, it said. The unit's operating loss in the second half is estimated to be around GBP10 million, which will "adversely impact" earnings before interest, tax, depreciation and amortisation in the 2021 financial year. Write-offs because of the fire will cost an additional GBP10 million.

The company also flagged rising labour costs, particularly for lorry and van drivers, as a nationwide shortage creates supply chain problems across the industry.

On AIM, Kape Technologies closed up 12% at 397.00 pence. The digital security software provider raised USD354 million from a share placing, in line with guidance, and USD2.5 million via its retail offer on the PrimaryBid platform.

The fundraise enables Kape to proceed with its acquisition of ExpressVPN which it announced late Monday.

Kape said a total of 76.5 million new shares will be issued pursuant to the fundraise at a discounted issue price of 337.50p per share.

The dollar was lower against major counterparts after tame US inflation data. The euro stood at USD1.1821 at the European equities close, up from USD1.1807 late Monday. Against the yen, the greenback was trading at JPY109.65, down from JPY109.95 late Monday.

The pound was quoted at USD1.3845 at the London equities close, firm from USD1.3840 at the close Monday, getting a boost from upbeat UK labour market data.

The number of people out of work in the UK remains above pre-virus levels but ticked down in the three months to July, according to estimates from the Office for National Statistics released on Tuesday.

The UK unemployment rate was reduced to 4.6% in the three months to July from 4.7% in the previous three-month period. However, the ONS noted the jobless rate still sits 0.6 percentage point higher than pre-pandemic levels.

Brent oil was quoted at USD73.74 a barrel at the equities close, up from USD73.57 at the close Monday.

Gold was quoted at USD1,807.10 an ounce at the London equities close, higher against USD1,795.77 late Monday as the dollar weakened.

The economic events calendar on Wednesday has China retail sales numbers overnight, UK inflation readings at 0700 BST and US import and export prices at 1330 BST.

The UK corporate calendar on Wednesday has annual results from cybersecurity provider Darktrace and housebuilder Redrow. There are also interim results from Wagamama and Frankie & Benny's dining chain owner Restaurant Group, oil and gas company Tullow Oil and tonic water maker Fevertree Drinks.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Bunzl PLC 2,478.00 GBX -0.36
Ferrexpo PLC 311.00 GBX -2.08 -
JD Sports Fashion PLC 1,076.50 GBX -2.23 -
Kape Technologies PLC 445.00 GBX 6.46 -
Ocado Group PLC 1,759.50 GBX -0.06
Antofagasta PLC 1,402.50 GBX -2.43 -
Marks & Spencer Group PLC 192.40 GBX 2.81
Anglo American PLC 2,533.00 GBX -2.50
International Consolidated Airlines Group SA 183.84 GBX 4.69
Rio Tinto PLC 4,792.50 GBX -0.79
BHP Group PLC 1,859.20 GBX -0.46

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