Stock prices in London, Paris and Frankfurt were mostly in the red at Wednesday midday, ahead of weekly US jobless data to come shortly and a US interest rate decision later.
Also, the Bank of England’s interest rate call approaches on Thursday.
‘Interest rate decisions don’t seem to be getting any easier,’ commented AJ Bell’s Laith Khalaf. ‘The escalation of conflict in the Middle East has bumped up the oil price, which will put upward pressure on inflation if sustained.
‘Meanwhile the threat posed to the global economy from tariffs remains present, if not quite as enormous as it did two months ago. Then there’s the UK economy, which contracted sharply in April, albeit after a good growth spurt in the first quarter of the year. Add in a weakening labour market, and you have a smorgasbord of mixed messages which the Bank of England has to make some sense of.’
Khalaf added: ‘It’s going to be very hard for the Bank to raise interest rates when CPI is so far above target, with further potentially inflationary pressures coming from higher energy prices and the chancellor’s national insurance hike.’
The FTSE 100 index was down 3.02 points at 8,831.01. The FTSE 250 was down 38.37 points, 0.2%, at 21,198.68, and the AIM All-Share was up 1.60 points, 0.2%, at 762.25.
The Cboe UK 100 was marginally down at 880.07, the Cboe UK 250 was down 0.2% at 18,726.38, and the Cboe Small Companies was marginally down at 16,988.03.
On the FTSE 250, AO World was down 2.7%.
The Bolton, England-based online electrical goods retailer reported a 40% decline in pretax profit for the year ended March 31, to £20.6 million.
However, on a like-for-like basis, adjusted pretax profit shot up 32% to a record £45.2 million, beating its guidance range. Also, revenue improved 9.5% to £1.14 billion and looking ahead, AO World expects adjusted pretax profit growth of up to 15%, to between £40 million and £50 million, for the current year.
AJ Bell’s Russ Mould said the company had ‘rediscovered its spark’ but added: ‘At face value, everything looks good until you dig into the numbers. The mobile arm continues to be problematic and that‘s acting as an anchor on the business. The mobile market is in decline and competition is fierce...Costs are another headwind for AO and they’re only going to get worse.
‘Furthermore, potential legislative changes could create more problems if retailers are forced to take back a customer‘s old electrical product for free when they deliver a new one.’
On AIM, Oxford Metrics fell 11%.
The Oxfordshire, England-based motion capture technology company reported a swing to a pretax loss of £666,000 for the six months to March 31 from profit of £3.7 million the year before.
First-half revenue was £20.1 million, down 14% but in line with company expectations as the previous year’s revenue was ‘particularly strong’ and was followed by order volumes normalising in the second half of 2024.
The average UK house price increased by 3.5% in the 12 months to April, halving from 7.0% annual growth recorded in March this year. This follows changes to make stamp duty discounts less generous for some home buyers, which took effect from April.
The report said this was the first slowing of UK annual house price inflation since December 2023.
In European equities on Wednesday, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was down 0.3%.
Annual inflation in the euro area cooled to 1.9% in May, dipping below the European Central Bank’s 2% target for the first time in over three years, final figures from Eurostat showed on Wednesday.
The May rate of consumer price inflation slowed from 2.2% in April and marked a significant cooling from 2.6% a year earlier. The final reading confirmed a flash estimate released at the beginning of this month.
Across the wider EU, annual inflation also eased, falling to 2.2% in May from 2.4% in April and 2.7% in May 2024.
Also in Europe, Sweden’s Riksbank cut its key interest rate by a quarter point to 2.0% and said another cut this year was possible.
‘The economic recovery that began last year has lost momentum, and inflation is expected to be somewhat lower than in the previous forecast,’ the Riksbank said in a statement.
The pound was quoted at $1.3451 at midday on Wednesday in London, lower compared to $1.3502 at the equities close on Tuesday. The euro stood at $1.1503, lower against $1.1522. Against the yen, the dollar was trading lower at JP¥144.83 compared to JP¥145.07.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 7.00 points, the S&P 500 index up 0.1%, and the Nasdaq Composite up 0.2%.
The yield on the US 10-year Treasury was quoted at 4.38%, narrowing from 4.42%. The yield on the US 30-year Treasury was quoted at 4.88%, narrowing from 4.93%.
Brent oil was quoted higher at $76.33 a barrel at midday in London on Wednesday from $75.45 late on Tuesday.
Iran’s supreme leader Ayatollah Ali Khamenei on Wednesday gave a televised speech in which he vowed that his country ‘will never surrender’ as it warned the US of ‘irreversible repercussions’ if it intervenes militarily.
‘Iran is a significant exporter of oil in its own right and there will be concern it might try and obstruct the Strait of Hormuz through which a healthy chunk of the world’s oil and liquefied natural gas passes,’ AJ Bell’s Mould said. ‘Any easing of tensions could put crude on the back foot given the underlying fundamentals of uncertain demand due to a cloudy economic outlook and rising supply from producers’ cartel OPEC+.
‘If higher oil prices stick it would act as a renewed inflationary pressure and this further complicates the decision making of the US Federal Reserve which is set to announce its latest decision on interest rates tonight.’
Gold was quoted lower at $3,378.29 an ounce against $3,381.51.
Still to come on Wednesday’s economic calendar, the US has weekly jobless data, and later its interest rate decision.
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