Share prices in London were retreating again early Thursday, giving back some, but not all, of Wednesday’s rally, with market focus switching to central bank policy and US economic data, while traders also keep an eye on talks between Ukraine and Russian being held in Turkey.
‘Today is chiefly about two critical economic events: the ECB meeting and the US inflation data. Christine Lagarde has a lot to ponder among higher inflation and heightened geopolitical tensions between the EU and Russia,’ AvaTrade Chief Market Analyst Naeem Aslam said.
‘Today, the ECB president will need to spill some beans concerning her thinking about the bank’s monetary policy. Higher inflation will be her top agenda and the impact of sanctions imposed by the EU on Russia. The bank will certainly not like to be in a position where it will have to reverse its monetary policy again and adopt a dovish monetary policy again.’
The ECB’s rate decision is due at 1245 GMT, followed by a press conference with President Lagarde at 1330 GMT.
The FTSE 100 index was down 71.27 points, or 1.0%, at 7,119.30 early Thursday. The mid-cap FTSE 250 index was down 61.34 points, or 0.3%, at 19,987.60. The AIM All-Share index was up just 0.41 of a point at 987.13. The indices had closed up 3.3%, 4.4% and 2.4% on Wednesday.
The Cboe UK 100 index was down 0.5% at 709.28. The Cboe 250 was up 0.2% at 17,621.48, and the Cboe Small Companies was flat at 14,390.15.
Danske Bank said: ‘A key event today will be the ECB meeting, where we will get important signals on how the ECB sees the current trade-off between inflation and growth. We expect the ECB to continue its path towards entering a ‘neutral’ monetary policy calibration and formally set an end date for the APP programme - in September this year, due to the high inflation pressure, but fall short of giving a firm indication of an upcoming rate hike.’
In mainland Europe, both the CAC 40 in Paris and DAX 40 in Frankfurt were down 1.8%.
The shift backwards is disappointing after Wednesday’s strong session, where London’s blue-chip index advanced 3.3%, while in Paris the CAC 40 ended 7.1% higher, and the DAX 40 in Frankfurt surged 7.9%.
AvaTrade’s Aslam said the bounce in equity markets on Wednesday was likely ‘a dead cat bounce’, believing the ‘actual fundamentals which drove the global stock markets to their knees haven’t changed’.
This optimism had continued into the Asia session overnight. The Japanese Nikkei 225 index closed up 3.9%. In China, the Shanghai Composite closed up 1.2%, while the Hang Seng index in Hong Kong advanced 1.3%. The S&P/ASX 200 in Sydney closed up 1.1%.
The positive trade overnight was partly spurred by a retreat in commodities prices.
Brent oil was quoted at $115.56 a barrel on Thursday morning in London, down from $121.55 late Wednesday. Gold stood at $1,985.60 an ounce, sliding from $2,000,80 late Wednesday.
The highest level talks between the two sides since the Russian invasion began were due to be held in Turkey on Thursday.
Ukraine Foreign Minister Dmytro Kuleba ‘has arrived in Antalya for the talks on Russia ceasing its hostilities and ending its war against Ukraine,’ Foreign Affairs Ministry’s spokesperson Oleg Nikolenko said on Wednesday evening. Kuleba was due to meet his Russian counterpart, Sergei Lavrov.
On Wednesday, Ukraine President Volodymyr Zelensky signalled a willingness to compromise as Russian forces continued their advance and the safe routes agreed for the evacuation of civilians were only implemented with partial success.
‘In any negotiation, my goal is to end the war with Russia. And I am also ready to take certain steps,’ Zelensky told Germany’s Bild newspaper.
Commented Marshall Gittler, head of Investment Research at BDSwiss: ‘A lot depends on whether a settlement can be found that allows both sides to claim some degree of victory. Putin’s demands that Russian-speaking areas be carved out of Ukraine and ceded to Russia may be a step too far for any leader to concede.
‘There’s bound to be more volatility to come, but at least we know now that the market movements won’t all be in one direction.’
In London, Spirax-Sarco Engineering was up 2.3% after its annual profit was sharply higher following an ‘excellent performance’ beat pre-pandemic sales in 2019.
In 2021, pretax profit surged 31% to £314.5 million from £240.1 million, on revenue growth of 13% to £1.34 billion from £1.19 billion - and was ahead of £1.24 billion sales in 2019.
The Steam Specialties business - which accounts for 56% of revenue - saw sales rise 9% thanks to increased demand, while Electric Thermal Solutions sales increased 2% year on year. Watson-Marlow sales jumped 27%.
Spirax-Sarco declared an annual dividend of 136.0 pence, up 15% from 118.0p in 2020.
Chief Executive Nicholas Anderson said: ‘For 2022 we currently anticipate strong sales growth, driven by record order books and continued global industrial production growth. While adjusted operating profit growth will be reduced by the full-year impact of revenue investments in 2021, we currently anticipate the adjusted operating profit margin in 2022 will still be comfortably above pre-pandemic levels.’
DS Smith was down 1.5%.
The packaging maker said its trading in the third quarter in been in line with expectations, with the momentum seen in the first half carrying into the second.
In the period since November 1, the London-based firm said volume growth and packaging price increases have ‘more than’ offset ongoing input cost increases, leading to ‘good progress’ in profitability and cash generation.
The company noted continued like-for-like volume growth in its fast-moving consumer goods unit, and expects mid single-digit percentage like-for-like volume growth for the year to April 30.
DS Smith said its production in Ukraine and Russia is currently suspended, but said its involvement is a ‘minority investment’ in a Ukrainian business, which serves customers predominantly in Ukraine with ‘limited’ sales in Russia.
Chief Executive Miles Roberts said: ‘Despite the increasing macro-economic and geo-political uncertainty, the outlook for the year remains unchanged by recent events with the second half of the year continuing to show good momentum.
‘Our geographic footprint, secure supply chain and customer offering focused on innovative sustainable packaging solutions remains compelling to our resilient customer base of FMCG multi-national companies and has driven continued good volume growth, despite the strong comparatives.’
Persimmon, Rio Tinto and CRH anchored the FTSE 100 - down 6.6%, 6.4%, and 3.9%, respectively - as the three stocks went ex-dividend on Thursday.
The pound was quoted at $1.3155 early Thursday, soft on $1.3165 at the London equities close Wednesday.
The euro was priced at $1.1030, down from $1.1070. Against the yen, the dollar was trading at JP¥115.86, up from JP¥115.77.
In addition to US consumer prices at 1330 GMT, the economic events calendar on Thursday has the latest weekly jobless claims numbers at the same time.
Copyright 2022 Alliance News Limited. All Rights Reserved.
