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(Alliance News) - Stock prices in London were lower at midday on Tuesday on fears over fuel shortages, rising inflation, and the removal of monetary stimulus by the US Federal Reserve.

Meanwhile, transport stocks fell after the UK government seized control of Go-Ahead's Southeastern rail franchise.

Fed Chair Jerome Powell is due to give testimony to the Senate Banking Committee later on Tuesday. In prepared remarks, Powell said supply bottlenecks are putting pressure on inflation, which will likely remain elevated in coming months.

The FTSE 100 index was down 31.41 points, or 0.4%, at 7,031.59. The mid-cap FTSE 250 index was down 372.38 points, or 1.6%, at 23,236.43. The AIM All-Share index was down 9.09 points, or 0.7%, at 1,259.14.

The Cboe UK 100 index was down 0.6% at 698.40. The Cboe 250 was down 1.9% at 21,021.10. The Cboe Small Companies was 0.1% lower at 15,795.00.

In Paris, the CAC 40 stock index was down 1.7%. In Frankfurt, the DAX 40 was down 1.1%.

New York also was pointed sharply lower. The Dow Jones Industrial Average was called down 0.5% based on futures trading, the S&P 500 down 0.9% and the Nasdaq Composite down 1.5%.

"While stock traders' minds were already busy with the prospect of a less accommodative environment sparked by rising costs, the current surge in energy prices is increasing concerns, particularly with the energy crisis expected to worsen just as we get into winter. Stocks with exacerbated valuations, like the tech sector, are the most vulnerable in this context of rising uncertainty," said analysts at ActivTrades.

In the FTSE 100, Smiths Group was the best performer, up 4.0%, after the engineer reported annual results that beat consensus forecasts and raised its dividend.

For the financial year ended July 31, revenue was down 5.5% to GBP2.41 billion from GBP2.55 billion the year before. Revenue slightly pipped the market consensus estimate of GBP2.40 billion.

Annual operating profit, adjusted for strategic restructuring programme costs and write-downs, was GBP372 million, up 14% from GBP327 million. The figure beat the consensus forecast for operating profit of GBP357 million.

Pretax profit almost doubled to GBP240 million from GBP133 million, as operating costs were reduced to GBP2.08 billion from GBP2.31 billion year-on-year.

London-based Smiths declared a final payout of 26 pence, taking a total dividend to 37.7p, up 7.7% from 35.0p paid a year ago.

In addition, Smiths said it has signed a binding agreement with California-based medical technology firm ICU Medical to sell its Smiths Medical business for USD2.7 billion, supplanting a previous USD2.3 billion agreement with private equity firm TA Associates in August. Completion is expected in the first half of 2022. Following the sale, Smiths Group plans to return 55% of the proceeds to shareholders through a share buyback, it previously said.

Shares in oil majors BP, Royal Dutch Shell 'A' and Shell 'B' were up 2.0%. 2.8% and 2.4%, respectively, tracking spot oil prices higher.

The price of Brent crude oil jumped above USD80 for the first time in almost three years on expectations for surging demand and concerns about supplies as the world emerges from the virus pandemic.

Brent oil was quoted at USD80.21 a barrel on Tuesday at midday in London, up sharply from USD79.48 late Monday, as investors eye the OPEC+ meeting on Monday next week. The North Sea benchmark hit an intraday high of USD80.75 in early trade, its highest level since October 2018.

Ferguson was up 0.1% after the plumbing and heating products supplier lifted its payout and announced plans for a new USD1.0 billion share buyback.

For the financial year that ended July 31, revenue was USD22.79 billion, up 14% from USD19.94 billion in financial 2020, and pretax profit was USD1.89 billion, up 46% from USD1.29 billion.

Ferguson lifted its total dividend by 15% to 239.4 cents per share, from 208.2 cents a year earlier. Further, it announced plans for a USD1.0 billion buyback, after "taking into account the group's prospects and strong financial position".

At the other end of London large-caps, Sage was the worst performer, down 4.9%, after Goldman Sachs downgraded the accounting software provider to Sell from Neutral.

In the FTSE 250, FirstGroup was the worst performer, down 4.6%, as the transport operator suffered a negative read-across from peer Go-Ahead Group, which was down 22%.

The UK Department for Transport has decided not to renew the bus and train operator Go-Ahead's Southeastern rail franchise when it expires next month, after it was found to have not declared more than GBP25 million of historic taxpayer funding.

Go-Ahead, which owns operator London & Southeastern Railway alongside Keolis UK, says it regrets the decision, while acknowledging "errors".

UK Transport Secretary Grant Shapps said an investigation by his department identified evidence that since October 2014 the company has failed to declare more than GBP25 million of historic taxpayer funding which should have been returned.

Further investigations are being conducted and the government said it will consider options for more action, including financial penalties.

Fellow transport and ticketing stocks National Express, Trainline and Stagecoach were down 3.7%, 2.5% and 4.2% respectively.

"The TfL decision to take over the running of the Southeastern Railway strips a significant chunk of revenue from Go-Ahead Group, highlighting a pro-active stance towards nationalisation from a Conservative party than many would have expected. With the Conservatives having raised taxes to fund the NHS and now nationalised part of the rail network, the Labour party will have to start looking for new policies to distinguish themselves from this new approach," said IG Group's Josh Mahony.

Go-Ahead also said Elodie Brian has resigned as chief financial officer, effective immediately. A search has begun for her successor. Gordon Boyd, a veteran of Drax and Capita, has been appointed in the interim. Further, publishing of Go-Ahead's financial year 2021 results, previously scheduled for September 30, has been postponed.

Elsewhere, shares in Petershill Partners were trading at 343.95 pence, down 1.7% from its initial public offering price of 350p, as the investor in alternative asset managers, went public in London with a GBP4.0 billion valuation.

Petershill Partners, which was spun off from Goldman Sachs, became the second-largest IPO in London in 2021 behind Will Shu's Deliveroo, which had a market value of GBP7.59 billion upon listing.

Petershill expects to be eligible for inclusion in the FTSE indices. Its current market capitalisation would make it one of the most valuable companies in the FTSE 250 index of London mid-caps.

The dollar was higher against major counterparts. The pound was quoted at USD1.3620 at midday on Tuesday, sharply lower from USD1.3706 at the London equities close Monday.

The euro was priced at USD1.1667, down from USD1.1698. Against the yen, the dollar was trading at JPY111.30, up from JPY110.98.

Gold stood at USD1,740.65 an ounce at midday, lower from USD1,752.17 late Monday.

Analysts at ActivTrades explained: "The dollar is rising during Tuesday trading with the greenback's strength arising from growing confidence among investors that tapering will begin in November, following last week's strong signal from the Federal Reserve that the time for tightening is fast approaching.

"Gold continues to trade lower today, with the price currently oscillating down towards USD1,740. This downward trend could cause a surprise given today's prevailing 'risk-off' trading sentiment. However, investors' risk appetite for safe havens like gold and silver is being countered by a higher US dollar, which is boosted by the prospect of a hawkish switch from the Fed."

Tuesday's economic calendar has US consumer confidence at 1500 BST. Fed Chair Powell appears before the US Congress, also at 1500 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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