FTSE 100 under pressure after Chinese inflation news but Smith & Nephew heads higher

• FTSE 100 down 39 points
• Housebuilders suffer profit taking
• Rolls-Royce rises

9.08pm: Medical products group outperforms

In a downbeat day for the FTSE 100 so far, Smith & Nephew PLC (LON:SN.) is a standout performer.

Shares in the medical products group have jumped 3.97% or 58.5p to 1531p after analysts at Credit Suisse raised their recommendation from neutral to outperform.

But there was further profit taking in the housebuilders following Monday’s gains after the latest evidence from the Halifax of Britain’s booming housing market.

Persimon PLC (LON:PSN) has lost 2.45% while Barratt Developments PLC (LON:BDEV) is down 1.69%.

Overall the leading index continues to head lower, down 39 points or 0.55% at 7056.09.

8.28am: Investors remain cautious 

Leading shares are heading lower at the open, with the FTSE 100 down 27.73 points or 0.39% at 7067.36.

Inflation jitters continue to be on investors’ minds, with the latest Chinese data adding to the concerns.

The headline consumer price index came in at 1.3% in May, up from 0.9% in April . As recently as February the index was showing a fall of 0.2%. 

More startling was a 9% surge in factory gate prices, up from 6.8% in April as commodity prices jumped.

Central banks including the US Federal Reserve continue to maintain that inflationary pressure are transitory, as the big drops in prices seen a year ago due to the pandemic work their way through the system.

But looking at the Chinese figures, Michael Hewson, chief market analyst at CMC Markets UK, said: “There is increasing evidence that various supply side issues are starting to create a situation where rather than being transitory, inflation pressures could become more persistent. It is certainly something Chinese business is becoming more concerned about, along with Chinese authorities given recent steps to curb the recent sharp rise in commodity prices.

“This is a situation that central bankers appear to be remarkably relaxed or complacent about, depending on which side of the fence you happen to be on.”

So markets are likely to remain uncertain ahead of Thursday, which sees the latest US inflation numbers.

Richard Hunter, head of markets at interactive investor, said: ”Tomorrow’s Consumer Price Index reading in the US is expected to reveal that the total annual inflation rate rose to 4.7% and core inflation to 3.4%, above the Federal Reserve’s target of 2%. Certainly, any numbers above these levels would draw comment from the Fed, who otherwise fully expect inflationary pressures to diminish over the coming months.”

Elsewhere Rolls-Royce PLC (LON:RR.) has added 0.31% to 111.74p. The aero-engine company has appointed Anita Frew as a non-executive director and chair designate.

Frew – the chair of Croda and former deputy chair at Lloyds Banking Group – will succeed Sir Ian Davis as chair in October.

6.30am: Markets set for cautious start

The FTSE 100 is expected to open marginally lower on Wednesday as investors continued to tread cautiously amid macroeconomic jitters.

Spread- betters IG expect the blue-chip index to open around 9 points lower after ending Tuesday’s session up 18 points at 7,095.

Predictions of a sedate start followed a mixed performance for Wall Street overnight, with the Dow Jones Industrial Average closing down 0.09% at 34,599 while the S&P 500 rose 0.02% to 4,227 and the Nasdaq was up 0.31% at 13,924.

The picture became bleaker in Asia this morning, with Japan’s Nikkei 225 down 0.33% while Hong Kong’s Hang Seng fell 0.16%.

Uncertainty about the prospect of inflation around the world is unlikely to have been helped by a jump in Chinese inflationary figures for May, while a lack of any other major news is unlikely to help shift sentiment away from neutral.

On currency markets, the pound was relatively flat against the dollar at US$1.415, with little in the way of major news to move the needle.

Around the markets:

Sterling: US$1.415, no change

Brent crude: US$72.59 a barrel, up 0.5%

Gold: US$1,894 an ounce, up 0.02%

Bitcoin: US$33,558, up 2%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mostly lower on Wednesday as China’s producer price index for May surged 9% from a year earlier, against expectations in a Reuters poll for an 8.5% increase.

The Shanghai Composite in China rose 0.16% but Hong Kong’s Hang Seng index fell 0.26%

In Japan, the Nikkei 225 slipped 0.28% while South Korea’s Kospi declined 0.68%.

Shares in Australia dipped, with the S&P/ASX 200 trading 0.08% lower.

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Proactive Australia news:

Australian Gold and Copper Ltd (ASX:AGC) has extended Achilles copper and base metal target following the completion of a large sampling program using portable X-Ray fluorescence (pXRF) along the Achilles shear zone southward from the recent drilling, at its 100% owned Cargelligo licence in central NSW.

Comet Resources Ltd (ASX:CRL) has started diamond drilling at the Santa Teresa Gold Project in Baja California, Mexico.

Boadicea Resources Ltd (ASX:BOA) has welcomed the completion of the 809.4 metre diamond drill hole by IGO Ltd (ASX:IGO) (OTCMKTS:IPGDF) (FRA:IDZ) in the company’s Symons Hill tenement in the Fraser Range.

Poseidon Nickel Ltd’s (ASX:POS) (OTCMKTS:PSDNF) (FRA:NYG) initial drilling results from Golden Swan discovery have demonstrated high-grade continuity with intersections up to 3.05 metres at 6.72% nickel within the wider Black Swan Project in Western Australia.

Great Boulder Resources Ltd (ASX:GBR) has recommenced reverse circulation (RC) drilling at the Blue Poles discovery within its Whiteheads Gold Project in Western Australia.

Calima Energy Ltd (ASX:CE1) has revised operational and financial guidance for the remainder of 2021 to reflect higher realised oil & gas prices, increased sales volumes based on production to-date and production results expected from the start of the company’s drilling campaign in Canada.

Piedmont Lithium Inc (NASDAQ:PLL) (ASX:PLL) (OTCMKTS:PDDTF) has further enhanced the sustainability of its flagship US lithium project in North Carolina with a 40% increase in the resource of the industrial minerals quartz, feldspar and mica.

Brookside Energy Ltd (ASX:BRK) (FSE:8F3) has completed drilling and casing operations at the high-impact Jewell 13-12-1S-3W SXH1 well in the SWISH Area of Interest (AOI) in the world-class Anadarko Basin of Oklahoma, USA.

Chalice Mining Ltd (ASX:CHN) (OTCQB:CGMLF) has received strong results from ongoing regional reconnaissance exploration at the Julimar Nickel-Copper-Platinum Group Element (PGE) Project in Western Australia.

Shree Minerals Limited (ASX:SHH) is gearing up for a reverse circulation (RC) drilling campaign at its Bruce Gold Project in the Northern Territory after identifying priority drill targets.

Story by ProactiveInvestors