LONDON MARKET OPEN: Mood hit as energy prices drive inflation worries

(Alliance News) - Equity prices in Europe slumped at the open on Tuesday, after worries about ...

Alliance News 12 October, 2021 | 8:45AM
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(Alliance News) - Equity prices in Europe slumped at the open on Tuesday, after worries about inflation knocked markets in Asia overnight.

In London, the FTSE 100 index was down 54.91 points, or 0.8%, at 7,091.94 early Tuesday. The mid-cap FTSE 250 index was down 137.84 points, or 0.6%, at 22,349.63. The AIM All-Share index was down 6.11 points, or 0.5%, at 1,202.94.

The Cboe UK 100 index was down 0.7% at 704.12. The Cboe 250 was down 0.6% at 20,157.90, and the Cboe Small Companies down 0.2% at 15,494.02.

In Paris, the CAC 40 index was down 0.8% early Tuesday. The DAX 40 in Frankfurt was down 0.7%.

European markets started the session on the back foot as inflation jitters knocked sentiment once more.

"Investors are finding it difficult to dismiss concerns that inflation will likely last longer than expected, sparking fears of stagflation. The main drivers of rising consumer prices are supply chain constraints caused by the coronavirus pandemic, as well as an impending power crisis, both of which are expected to have a negative impact on economic recovery and corporate earnings," said Naeem Aslam, chief market analyst at AvaTrade.

Brent oil was trading at USD83.61 a barrel early Tuesday, soft on USD83.77 late Monday but continuing to trade around three-year highs. Crude prices have more than doubled compared to this time a year ago.

Miners were amongst the worst performers in the FTSE 100 early Tuesday, reversing gains after topping the blue-chip index on Monday. Anglo American was down 2.6%, Rio Tinto down 2.3% and BHP down 1.5%.

Amongst a handful of blue-chip stocks in the green was Polymetal International, up 0.4% after Deutsche Bank started the precious metals miner with Hold.

Gold was quoted at USD1,761.87 an ounce early Tuesday amid the risk-off mood, higher than USD1,758.25 on Monday.

On AIM, ASOS extended losses after closing down 13% on Monday. The online fashion retailer warned profit in the financial year ahead is set to slide and announced the departure of Chief Executive Nick Beighton. ASOS shares were down 2.5% early Tuesday.

Sterling dipped Tuesday morning, trading at USD1.3595 and lower than USD1.3625 at the London equities close on Monday, after data showed the UK workforce returned to pre-virus levels in September.

The unemployment rate eased in line with market expectations, standing at 4.5% in the three months to August versus 4.6% for July.

The number of payroll employees rose 207,000 to a record 29.2 million in September, returning to pre-pandemic levels. The number of job vacancies in the three months to September hit a record high of 1.1 million, an increase of 318,000 from its pre-pandemic level.

Growth in average total pay - which includes bonuses - was 7.2%, and regular pay, which strips out bonuses, was 6.0% for the three months to August.

Ahead of the wind-up of the government's pandemic job retention scheme, the redundancy rate remained around pre-virus levels.

Despite the robust labour market update, ING thinks caution will prevail at the Bank of England's November meeting of the Monetary Policy Committee.

"True, there hasn't been much push back from MPC members in light of recent market pricing. But before hiking the bank will want to be sure that a) wage growth is going to be sustained and more importantly, widespread, and b) that the furlough scheme hasn't resulted in a material increase in jobs market slack," said ING.

The euro traded at USD1.1559 early Tuesday, softening from USD1.1570 late Monday. Besides the UK jobs data, the economic events calendar on Tuesday has the Germany ZEW survey at 1000 BST.

The ZEW economic sentiment index is expected to decline to 24.0 in October from 26.5 in September.

This comes against a backdrop of political wrangling, as exploratory talks between the three parties hoping to form Germany's next government resumed in Berlin on Monday, two weeks after the Social Democrats defeated Chancellor Angela Merkel's conservatives in the country's federal election.

Representatives of the Social Democrats, the Greens and the business-friendly Free Democrats will continue to discuss areas of agreement and potential conflict. The talks are expected to take weeks, with the hope of forming a government before Christmas.

The Nikkei 225 index in Tokyo closed down 0.9% on Tuesday. Against the yen, the dollar was quoted at JPY113.21, soft versus JPY113.28 but still trading around three-year highs.

In China, the Shanghai Composite ended down 1.3%, while the Hang Seng index in Hong Kong was down 1.7%. The S&P/ASX 200 in Sydney ended down 0.3%.

By Lucy Heming;

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Polymetal International PLC 1,332.50 -
ASOS PLC 2,369.00
Anglo American PLC 2,812.50
BHP Group PLC 2,058.50
Rio Tinto PLC 4,592.50

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