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Euro falls below dollar parity | Abrdn investors exit


European shares fell sharply after US inflation for June came in higher than expected, raising bets about a more aggressive Federal Reserve next week and pushing the euro below parity with the dollar for the first time in 20 years.

Inflation in the US rose to 9.1% in June, the highest since 1981 and a greater increase than economists predicted. 

The consumer price index, a broad measure of goods and services in the nation, soared above the 8.8% estimate.

The CAC 40 in Paris ended down 0.7%, while the DAX 40 in Frankfurt ended down 1.2%. The FTSE 100 closed 53.49 points lower at 7,156.37.

The pound was quoted at $1.1929 at the London equities close Wednesday, up compared to $1.1906 at the close on Tuesday.

Sterling found support from data showing the UK economy defied expectations and strengthened in May.

Brent oil was quoted at $100.80 a barrel at the London equities close Wednesday, up a touch from $100.37 late Tuesday.

Abrdn investors exit

At the bottom of the blue-chips was Abrdn, falling 5% after HSBC cut the stock to ‘hold’ from ‘buy’. Analysts at Barclays also turned negative on the stock amid falling assets and concern it may cut its dividend to 8p from 14.6p paid last time.

Half-year results from the FTSE 100 group on 9 August are expected to show a fall in net revenues and declining operating margins.

Barclays believes clients will have pulled a net £37.3 billion from Abrdn in the first half of the year, while the impact of the market sell-off will also have delivered a £48.4billion hit.

Abrdn closed 8.25p, or 5%, lower at 154.25p.

Wetherspoon cautions

JD Wetherspoon closed down 8.3% in the FTSE 250 after cautioning that its loss for the financial year ending July 31 will be chunkier than expected, as labour costs increase.

“Many people predicted a boom in pub sales when lockdowns and restrictions ended, due to pent-up demand, but recovery for many companies has been slower and more laborious than was anticipated,” it said in an update.

Contrary to expectations, sales in major city centres, apart from London have been stronger than suburban locations or smaller towns.

Like-for-like sales in the first 11 weeks of quarter 4 were down 0.4%, compared to the same, pre-pandemic, period in 2019.

Losses for the current financial year (FY22) will be higher than expected at approximately minus £30m, reflecting higher labour, repair and marketing costs.

The group said that inflation has “proved to be far higher and more intractable than anyone anticipated”. However, the group believes its “overall costs will increase by less than the current rate of inflation in FY23”.

Charlie Huggins, head of equities at Wealth Club, commented: “It’s been an incredibly tough couple of years for Wetherspoons, but there are signs it is now emerging from the abyss with sales finally recovering to pre-pandemic levels in the fourth quarter.

“However, just as one major threat recedes, another starts to rear its ugly head – inflation. The group’s costs base is far higher today than it was a couple of years ago, this means it will make a higher than expected loss this year.”

ITV and BT in competition probe

ITV and BT are among those being investigated for allegedly breaking competition law in sports broadcasting.

The Competition & Markets Authority said the probe relates to the purchase of freelance services to support production and broadcasting of sports content.

The watchdog said: “At this stage the CMA believes it has reasonable grounds to suspect one or more breaches of competition law. The CMA has not reached a view as to whether there is sufficient evidence of an infringement of competition law for it to issue a statement of objections to any party or parties.”

ITV noted the announcement and said it is “committed to complying with competition law and is cooperating with the CMA’s inquiries”.

AMTE battery deal

AMTE Power, the Thurso-based commercial battery cell manufacturer, has signed a deal to supply ultra high power cells to engineering services company MAHLE Powertrain for the next generation of electric vehicles.

Full story here

Global markets

Stocks made slight gains across Asia on Wednesday while the euro hovered just above parity against the dollar as investors awaited a US inflation report.

The monthly consumer price numbers will be the main focus of attention on how they will affect the Federal Reserve’s interest rate thinking ahead of its next meeting on 27 July.

The euro was at $1.00350 on Wednesday, as investors remained focused on whether it would fall below one US dollar for the first time since 2002.

Oil prices paused their overnight declines. Brent crude was little changed at $99.60 a barrel with U.S. West Texas Intermediate crude at $95.89.

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