European equities entered Wednesday afternoon in downbeat fashion, with lingering monetary policy concerns and worries related to developments in the Middle East tempering enthusiasm.
Stocks in Europe struggled despite Asian equities getting a boost from China infrastructure spending plans.
The euro, meanwhile, was slightly lower on the eve of the European Central Bank’s next meeting.
The FTSE 100 index was down 7.88 points, 0.1%, at 7,381.82. The FTSE 250 was down 180.10 points, 1.1%, at 16,814.00, and the AIM All-Share was down 5.03 points, 0.7%, at 673.42.
The Cboe UK 100 was up 0.1% at 737.55, though the Cboe UK 250 was down 1.4% at 14,535.52, and the Cboe Small Companies was virtually flat at 12,694.27.
In European equities on Wednesday, the CAC 40 in Paris was down 0.4%, while the DAX 40 in Frankfurt was 0.3% lower.
European stocks struggled, despite sentiment in Asia getting a boost after China unveiled plans for $137 billion in extra debt to boost infrastructure spending.
The country approved a plan to issue ¥1 trillion in sovereign bonds to be distributed to local governments to support national disaster prevention and recovery.
Leaders rarely alter the budget mid-year, but it did happen in 2008 after the Sichuan earthquake and during the Asian financial crisis in the late 1990s.
There was some upbeat news on the Germany economy, too. According to data from the Ifo, Economic sentiment in the Germany improved more than expected in October.
The ifo Business Climate Index rose to 86.9 points in October from 85.8 points in September. October’s print was better than markets had expected, with the index predicted to edge up to only 85.9 points month-on-month, according to FXstreet-cited consensus.
‘Companies are somewhat more satisfied with their current business. In addition, managers were less pessimistic in their view of the coming months. Germany’s economy can see a silver lining ahead,’ the Munich-based research institution said.
The mood in European equity markets was still downbeat, however.
‘Between patchy corporate results, lingering inflation and monetary worries, the spike in treasury yields, and rising geopolitical concerns, investors have a lot to digest,’ ActivTrades analyst Pierre Veyret commented.
Moreover, the United Nations chief warned that the situation in the Middle East is growing more dire by the hour, with the risk of the Gaza war spreading through the region increasing as societies splinter and tensions threaten to boil over.
The pound was quoted at $1.2121 at midday on Wednesday in London, down compared to $1.2163 at the equities close on Tuesday. The euro stood at $1.0575, lower against $1.0588. Against the yen, the dollar was trading at JP¥149.92, up compared to JP¥149.90.
In the FTSE 100, consumer goods firm Reckitt Benckiser lost 5.9%.
In the third quarter of 2023, the Dettol maker said like-for-like sales ticked up 3.4% to £2.60 billion. This was driven by 8.1% and 5.4% growth in its Hygiene and Health arms, respectively, and was offset by a 12% fall in its Nutrition division.
Reckitt on Wednesday also said it is beginning its £1 billion share buyback programme, which will commence imminently and last over the next 12 months.
AJ Bell’s Danni Hewson said the news was ‘not enough to blind shareholders to an uncertain start for new Reckitt boss Kris Licht’.
Licht joined the company as chief executive at the start of October.
In the FTSE 250, Bytes Technology rose 6.2%
The Surrey, England-based computer software posted a 23% rise in pretax profit to £33.3 million for the six months that ended August 31 from £27.0 million a year earlier. Revenue rose 16% to £108.7 million, from £93.5 million.
Against the backdrop of robust earnings, Bytes Technology boosted its interim dividend by 13% to 2.7 pence from 2.4p.
Chief Executive Neil Murphy described the first-half performance as ‘another strong financial’ results. He said that ‘we have continued to see strong demand from our corporate and public sector customers for security, cloud adoption, digital transformation, hybrid data centres and remote working solutions’.
Essentra lost 5.0%, as it grapples with a ‘softer trading environment’.
Essentra, which provides components to customers in the manufacturing, automotive, electronics and construction fields, said it ‘experienced market softening’ in the Europe, Middle East and Africa region.
In the third quarter of 2023, like-for-like and trading day adjusted group revenue fell 7.1% on-year. The decline eased from 12% in the second quarter.
On AIM, Ethernity Networks shares more than doubled to 1.24p.
On Tuesday, Ethernity said it no longer considers 5G Innovation’s $90,000 settlement notice pursuant to subscription agreement was issued validly, due to notification of an event of default.
The supplier of data processing semiconductor technology for networking appliances is now seeking to come to an agreed position on the treatment of the subscription while proceedings remain suspended.
Stocks in New York were called mixed. The Dow Jones Industrial Average is called up 0.1%, though the S&P 500 index is called down 0.4% and the Nasdaq Composite 0.7% lower.
Brent oil was quoted at $87.00 a barrel at midday in London on Wednesday, up from $86.37 late Tuesday. Gold was quoted at $1,972.99 an ounce, up against $1,963.03.
Investors are also anticipating Canada’s latest interest rate decision to come later in the day.
Markets are expecting the bank to keep rates steady at 5%, while keeping the options open for further rate hikes.
‘Recent evidence that inflationary pressures are easing have dampened expectations of further rate rises and the sell-off in global bonds has further strengthened the case for interest rates to remain on hold. However, the BoC is unlikely to provide any support for hopes of an early cut in interest rates,’ said Lloyds Banking Group analysts.
The European Central Bank takes centre-stage on Thursday. It is expected to decide against a rate hike.
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