London shares opened lower on Wednesday, after UK consumer price inflation remained in double digits last month, all-but ensuring an interest rate hike by the Bank of England next month.
The FTSE 100 index opened down 16.52 points, 0.2%, at 7,892.92. The FTSE 250 was down 120.27 points, 0.6%, at 19,176.05, and the AIM All-Share was down 3.70 points, 0.4%, at 828.74.
The Cboe UK 100 was down 0.2% at 789.77, the Cboe UK 250 fell 0.5% to 16,822.24, and the Cboe Small Companies was down 0.1% at 13,228.53.
In European equities, the CAC 40 in Paris was flat, while the DAX 40 in Frankfurt was down 0.2%.
According to the Office for National Statistics, the annual rise in consumer prices cooled slightly to 10.1% in March from 10.4% in February. This was less of a slowdown than expected, with FXStreet-cited market consensus calling for UK inflation to fall below 10% to 9.8%.
‘The easing in the annual inflation rate in March 2023 mainly reflected price changes in the transport division, particularly for motor fuels,’ ONS explained, adding: ‘There were also downward effects from housing and household services, furniture and household goods, clothing and footwear, and restaurants and hotels.’
However, these downward movements were partially offset by price increases in food and non-alcoholic beverages, as well as recreation and culture, ONS said.
‘The rate that prices are rising has come down a touch but remains stubbornly high at 10.1%, which raises big questions about how much more work the Bank of England has to do,’ said AJ Bell’s Danni Hewson.
‘Reacting to today’s figures markets are now pricing in at least two further hikes, taking interest rates up to 4.75%, and are split on whether central bankers will need to go even further after that crucial core inflation number remained stubbornly static.’
The pound strengthened against the dollar following the consumer price index print.
Sterling was quoted at $1.2469 early Wednesday, up from $1.2424 at the London equities close on Tuesday. The euro was quoted at $1.0969, up a touch from $1.0964. Against the yen, the dollar was quoted at JP¥134.56, up versus JP¥133.96.
The data follows Tuesday’s labour market reading, which had shown wage inflation similarly had persisted at higher levels than expected in the three months to February. However, wage increases were still some four percentage points short of the rise in consumer prices.
‘The cost of simply living has crept insidiously higher and wage increases are struggling to keep pace with such high inflation, meaning that for many people there’s a growing amount of month left at the end of money,’ Hewson continued.
ONS figures also showed annual producer input price inflation cooled to 7.6% in March from an upwardly revised figure of 12.8% in February. Market consensus had been expecting a reading of 9.8%.
In the US on Tuesday, Wall Street ended mostly flat, with the Dow Jones Industrial Average and Nasdaq Composite both flat and the S&P 500 up 0.1%.
Markets in Asia on Wednesday were mostly downbeat. The Nikkei 225 index in Tokyo closed down 0.2%. The Shanghai Composite ended down 0.7%, and the Hang Seng index in Hong Kong was down 1.2%. The S&P/ASX 200 in Sydney closed up 0.1%.
In the FTSE 100, Antofagasta lost 2.7% in early trade.
The Chile-focused miner said its first-quarter copper production was in line with guidance, at 145,900 tonnes, which was 5.1% higher than the previous year. However, it was 25% lower the previous quarter. This reflects the ‘expected temporary reduction in throughput at Los Pelambres on lower water availability, and expected lower grades and scheduled maintenance at Centinela’, the miner explained. It expects copper production to improve throughout the rest of 2023.
Gold production was up 9.9% year-on-year at 42,200 ounces, but 25% lower than the fourth quarter. Antofagasta reiterated annual copper production guidance of 670,000 to 710,000 tonnes, and capital expenditure guidance of $1.9 billion.
Gold was quoted at $2,004.13 an ounce early Wednesday in London, lower than $2,010.02 late on Tuesday. Brent oil was trading at $84.52 a barrel, hardly changed from $84.56.
Glencore edged into the red, down 0.2%.
The miner and commodities trader published an open letter to shareholders of its New-York listed takeover target Teck Resources, alleging Teck’s board has ‘consistently refused any engagement’ regarding its takeover proposal.
Teck’s board had rejected what it dubbed an ‘unsolicited and opportunistic’ proposal from Glencore earlier this month.
Glencore told shareholders its proposal was a ‘merger and not a takeover’ and is ‘demonstrably superior’ to Teck’s own separation plan.
It noted its proposal would buy out shareholders of their coal exposure. They would receive either $8.2 billion in cash or 24% of CoalCo. ‘Glencore is willing to make an offer directly to Teck shareholders if the proposed Teck separation does not proceed and Glencore believes that this is required where there continues to be no engagement from the Teck board,’ it said.
Glencore is open to considering ‘making improvements’ to the proposal, it said.
Among London mid-caps, Redde Northgate added 5.0%.
The commercial vehicle rental provider updated on its financial year ending April 30. Redde said trading is ahead of expectations, noting ‘strong and resilient demand’ for its vehicle rental and accident management services. It noted an improvement to visibility of van supply in UK & Ireland, after seeing constraints for most of the financial year.
Redde now expects annual adjusted pretax profit to be at the top end of the company-compiled consensus range of £149.6 million to £164.4 million.
Meanwhile, Eurowag fell 3.5%, despite Jefferies reinitiating the stock at ’buy’.
In the small-caps, automotive retailer Pendragon added 11%, boasting a ‘very strong’ first quarter performance across all divisions, prompting Jefferies and Berenberg to up its price target.
It said underlying pretax profit was up 23% year-on-year to £23.0 million. It now expects to ‘comfortable outperform’ the board’s previous expectations for its full year.
‘There are encouraging signs of improvement in production and supply of new vehicles, although used vehicle supply is expected to remain tight for the foreseeable future,’ it noted.
Just Eat Takeaway fell 1.2%. It announced plans to repurchase up to €150 million worth of its own stock in order to improve earnings per share, while it said its effort to improve overall profitability is ‘running ahead of plan’.
However, total orders in the first quarter of 2023 were down 14% from a year before to 227.8 million from 263.5 million, while gross transaction value fell by 7.7% to €6.67 billion from €7.22 billion. Just Eat put this down to a ‘difficult’ pandemic comparator in the previous year.
On AIM, Woodbois plunged 65%.
The Africa-focus forestry, timber and afforestation company said its lender, Sydbank, is terminating the $6 million debt facility of its wholly-owner subsidiary Woodgroup ApS.
‘The reason cited by Sydbank for terminating the facility was that Woodgroup ApS generated a loss in Q1 2023. Sydbank believe that, as a consequence, the circumstances of Woodgroup ApS have changed significantly to their detriment,’ Woodbois explained.
Woodbois said it was ‘shocked’ by the decision, and will explore alternative funding sources.
‘Whilst it expects a difficult trading period in the short term, management believe that the fundamentals of the business are sound,’ it affirmed.
Still to come on Wednesday’s economic calendar, there’s consumer price index data from the eurozone at 1000 BST.
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