Stocks down as post-inflation data rally fades

(Alliance News) - Stock prices in London were down at midday on Thursday, with mixed corporate updates tempering enthusiasm in the wake of two favourable inflation readings earlier in the week.

A slowdown in inflation in both the US and UK lifted spirits this week, though equities are finding gains hard to come by on Thursday.

The FTSE 100 index was down 34.90 points, 0.5%, at 7,452.01. The FTSE 250 was down 164.16 points, 0.9%, at 18,512.32, and the AIM All-Share was down 0.46 of a point, 0.1%, at 715.11.

The Cboe UK 100 was down 0.4% at 743.40, the Cboe UK 250 was down 0.8% at 16,017.91, and the Cboe Small Companies was up 0.3% at 13,326.85.

In European equities, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was up 0.4%.

Sterling was quoted at USD1.2401 at midday on Thursday, lower than USD1.2448 at the London equities close on Wednesday. The euro traded at USD1.0854, lower than USD1.0864. Against the yen, the dollar was quoted at JPY151.21, up versus JPY150.91.

In the FTSE 100, Burberry was the biggest loser, plunging 10%.

The fashion company warned it is unlikely to achieve its annual revenue guidance amid a slowdown in luxury demand. Reporting on its half-year period to September 30, Burberry said revenue grew 3.8% on-year to GBP1.40 billion from GBP1.35 billion. Retail comparable store sales grew 10% at constant currency or 6% on a reported basis.

"The slowdown in luxury demand globally is having an impact on current trading. If the weaker demand continues, we are unlikely to achieve our previously stated revenue guidance for FY24," the firm said. It had expected low double-digit growth for the year. This would have a knock-on effect on profit, which would be towards the lower end of the current consensus range of GBP552 to GBP668 million.

Burberry dragged shares in peer LVMH Moet Hennessy Louis Vuitton down 2.2% lower in Paris.

BP and Shell fell 1.4% and 2.0% respectively, amid downward pressure on oil prices.

Brent oil was trading at USD80.97 a barrel at midday on Thursday, lower than USD81.59 on Wednesday. Brent prices fell after it emerged the US had increased crude stockpiles by more than expected last week.

In the FTSE 250, Premier Foods rose 2.0%.

The food manufacturer, behind brands such Ambrosia, Bisto, Mr Kipling and Oxo, said in the six months to September 30, pretax profit jumped 38% to GBP58.1 million from GBP42.1 million a year prior.

Trading profit rose 19% to GBP67.5 million from GBP56.7 million. Revenue climbed 18% to GBP494.1 million from GBP419.9 million.

Looking ahead, the company said it made a good start in its third financial quarter, and for financial 2024 ending March 30 expects trading profit to be about 10% higher in financial 2023, when it was GBP157.5 million, 12% higher than GBP141.2 million in financial 2022.

Royal Mail owner International Distributions Services lost 2.0%, after reporting a widened interim loss as costs increased.

The company once again used the results to call for "urgent" reform of its universal service mandate in the UK.

IDS said pretax profit in the half-year that ended on September 24 widened by 53% to GBP194 million from GBP127 million a year ago.

Revenue climbed 0.4% to GBP5.86 billion from GBP5.84 billion, trailing operating costs, which increased 2.3% to GBP6.10 billion from GBP5.97 billion.

Within that total, Royal Mail revenue fell 2.9% to GBP3.54 billion from GBP3.65 billion. By contrast, international package delivery arm GLS delivered a 5.9% revenue increase to GBP2.33 billion from GBP2.20 billion.

The company said it can not fund dividends until it returns to positive cash generation.

Great Portland Estates lost 4.8%, after its loss widened significantly in the first half, despite revenue ticking up, largely due to an increased deficit from investment property values.

In the six months that ended September 30, the London-based property developer said pretax loss widened to GBP253.4 million from GBP86.6 million a year earlier.

Revenue was up 9.4% to GBP47.6 million from GBP43.5 million, but deficit from investment property widened significantly to GBP219.7 million from GBP80.6 million. At September 30, its portfolio was valued at GBP2.3 billion, down 10%.

Looking ahead, it upgraded its rental value growth range for financial year 2024, which ends March 31, to 2.5% to 5.0%. In the first half, rental values were up 1.8%.

On AIM, Hotel Chocolat shares more than doubled to 364 pence, after closing at 139.00p on Wednesday.

The company said it has agreed to terms of a recommended cash acquisition by US multinational confectionery products manufacturer Mars. Hotel Chocolat's shareholders will receive 375p in cash for each share, a hefty premium to Wednesday's closing price, valuing the chocolatier at GBP534 million on a fully-diluted basis.

"This is the latest big company to take a bite out of the UK-listed market and is likely to continue to rattle nerves about an exodus from London," Hargreaves Lansdown analyst Susannah Streeter commented.

Another takeover object, City Pub Group, jumped 38%, though its probable new parent is a firm based closer to home.

Southern England and Wales-focused pub operator City Pub agreed on the terms of a recommended takeover offer with fellow AIM-listed pub operator Young & Co's Brewery.

The offer price of 108.75p represents a 46% premium to its Wednesday closing price, valuing the company at GBP162 million. The deal would expand Young's managed trading estate by 50 pubs to 279, with the deal expected to provide strategic, operational and financial benefits.

Young's shares were flat.

Stocks in New York were called lower. The Dow Jones Industrial Average and the S&P 500 index were called marginally lower, while the Nasdaq Composite was called down 0.2%.

Investors were also assessing developments on the geopolitical front, as the leaders of the world's two largest economies met in San Francisco.

US President Joe Biden and Chinese President Xi Jinping agreed to restore military communications at their first summit in a year, even as Biden went off script by saying he still considered Xi a "dictator".

The leaders shook hands and strolled in a garden at a historic California estate during four-hour talks aimed at preventing growing tensions between the world's largest economies from spiralling into conflict.

They also agreed that China would crack down on the production of ingredients for the drug fentanyl, responsible for a deadly epidemic of opioid abuse in the US. But Xi and Biden remained far apart on the wider flashpoint of Taiwan, with the Chinese president telling his US counterpart to stop arming the island and saying that reunification was "unstoppable".

Meanwhile, the US Congress passed a stop-gap funding bill to keep federal agencies running for another two months and avert a painful holiday season government shutdown – although the deal leaves out aid to war-torn Ukraine and Israel requested by Biden.

Gold was quoted at USD1,965.78 an ounce at midday on Thursday, slightly higher than USD1,962.09 on Wednesday.

Still to come on Thursday's economic calendar is the latest US jobless claims reading and an industrial production report from the world's largest economy at 1330 GMT and 1415 GMT.

By Greg Rosenvinge, Alliance News senior reporter

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