Europe midday: Shares stay in the red as investors fret over US CPI data

by | Aug 9, 2022

European shares were lower at midday on Tuesday with investor focus turning to key US inflation data on Wednesday.
The pan-European Stoxx 600 index fell 0.25%, after making gains on Monday. Britain’s FTSE 100 was just above the flatline after data showed retail sales rose 1.6% in July, buoyed by a heatwave and sales of hot-weather clothing, picnic items and electric fans, according to a report from the British Retail Consortium.

Investors are looking for clues on the potential pace and size of future interest rate rises by the US Federal Reserve.

An unexpectedly strong US jobs report last week cut the likelihood of a recession, but stoked fears the central bank would opt for more aggressive rate hikes as it looks to rein in inflation.

“Tomorrow’s inflation data in the US will be closely watched. Investors have had enough of the rising cost of living and any drop in the inflation number will be welcomed by markets. The consensus forecast for July’s data is 8.7% growth year-on-year versus 9.1% seen in June,” said AJ Bell analyst Danni Hewson.

“The fact economists are already predicting a slowdown in the rate of inflation means markets could be in for a shock if the inflation figure does not fall to the expected level. Just remember that inflation was higher than expected in both May and June’s readings, so forecasts can only be taken with a pinch of salt.”

In equity news, workspace company IWG plunged 10% after first-half earnings. The firm narrowed first-half losses amid strong demand for hybrid working.

In the six months to 30 June, adjusted pre-tax losses narrowed to £70.2m from £163.3m in the same period a year earlier, with system-wide revenues up 22.3% at £1.4bn. IWG said this was driven by strong demand for hybrid working.

Swiss duty-free retailer Dufry rose 2.7% as it said it saw strong sales momentum continue in July despite the soaring inflation.

Asset manager Abrdn slumped after it posted a drop in first-half profit and revenue and struck a cautious note on the outlook. Adjusted pre-tax profit fell to £99m from £163m in the same period a year ago, while adjusted operating profit slid 28% to £115m and fee-based revenues were down 8% to £696m. Abrdn said this was driven by market movements.

On an IFRS basis, the company swung to a pre-tax loss of £320m from a profit of £113m.

Legal & General nudged lower even as the insurer reported a rise in interim operating profits, driven by higher interest rates and a strong annuity portfolio performance.

Reporting by Frank Prenesti and Michele Maatouk at Sharecast.com

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