Stock prices were mostly higher at midday on Wednesday as markets prepared for possible rate cuts in Europe and Canada, with a boost for Smith & Nephew but a slump for B&M European despite strong earnings.
The FTSE 100 was up 24.43 points, 0.3%, at 8,256.47. The FTSE 250 was down 13.88 points, 0.1%, at 20,704.11, and the AIM All-Share was up 3.53 points, 0.4%, at 801.73.
The Cboe UK 100 was up 0.3% at 823.02, the Cboe UK 250 was down 0.1% at 18,191.27, and the Cboe Small Companies was down 0.1% at 16,948.43.
In European equities on Wednesday, the CAC 40 in Paris was up 0.8%, while the DAX 40 in Frankfurt was up 0.9%.
AJ Bell Investment Director Russ Mould said the Bank of Canada and the European Central Bank are expected to ‘steal a march’ on the Federal Reserve and Bank of England by cutting rates over the next 24 hours.
The Bank of Canada announces its interest rate decision later on Wednesday, while the ECB’s monetary policy decision will be released on Thursday.
Lloyds Bank said ahead of Thursday‘s ECB meeting ‘at which the Governing Council is widely tipped to reduce interest rates for the first time since September 2019 and take the deposit rate down to 3.75%, today’s focus will centre on the outcome of the Bank of Canada policy decision.’
‘Heading into the announcement, the probability that financial markets attach to a quarter-point cut has steadily increased to just over 80%, having been a 50/50 call a couple of weeks ago,’ Lloyds added.
Barclays expects the ECB to start its easing cycle by cutting rates by 25 basis points on Thursday.
‘The updated inflation forecasts should validate the decision by showing inflation sustainably at target by mid 2025. The rates guidance should remain unchanged as it provides, for now, enough flexibility to accommodate diverse easing trajectories,’ it remarked.
The decision would mark the end of a nine-month period in which policy rates were on hold, Barclays pointed out.
On Wednesday, stocks in Wall Street were called higher. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index was seen 0.2% to the good, and the Nasdaq Composite was called to open up 0.5%.
On Tuesday, stocks in New York closed higher as weak jobs data gave a boost to flagging hopes that interest rates will be cut this year.
The number of job openings in the US dropped more than expected in April, figures on Tuesday showed, suggesting the labour market may be starting to cool.
According to the US Bureau of Labor Statistics the number of job openings was 8.1 million on the last business day of April, below the FXStreet consensus of 8.3 million.
It was the lowest figure since February 2021.
The total for March was revised down by 133,000 to 8.4 million.
On Wednesday, ADP private payroll figures will be released ahead of the US jobs report on Friday.
The pound was quoted at $1.2772 at midday on Wednesday in London, lower compared to $1.2786 at the equities close on Tuesday. The euro stood at $1.0868, down against $1.0881. Against the yen, the dollar was trading at JP¥156.05, up compared to JP¥154.89.
In economic news, the pace of improvement of the UK private services economy slowed in May, purchasing managers’ index survey results from S&P Global data showed.
The seasonally adjusted services PMI business activity index fell to 52.9 points in May from 55.0 in April. Falling towards the 50-point mark separating growth from contraction, it indicates that UK business growth slowed. It was in line with the flash estimate from May 23.
The composite output index edged down to 53.0 points in May from 54.1 in April, indicating the pace of growth slowed. It however beat the flash estimate of 52.8 points.
S&P Global commented: ‘The rate of jobs growth accelerated across the UK private sector to a four-month high, reflecting greater hiring at services firms. Factory jobs dipped in May. Sustained employment growth coincided with an improvement in business confidence, which was well above its long-run average during May.’
In the FTSE 100 index, B&M European Value Retail slumped 5.8% despite reporting higher full-year sales and profit.
In the 53 weeks that ended March 30, the Luxembourg-headquartered variety goods retailer said pretax profit rose 14% to £498 million from £436 million a year prior. Earnings per diluted share rose 5.2% to 36.5 pence from 34.7p.
Revenue increased by 10% to £5.48 billion from £4.98 billion a year ago.
Revenue in B&M UK climbed 8.5% to £4.41 billion. In France, it surged 19% to £514 million. At Heron Foods, it increased 15% to £560 million. The retailer’s Heron Foods arm largely sells frozen goods.
But Shore Capital analyst Clive Black felt it was a ‘curious statement’.
He wondered whether B&M’s growth plans would leave it a ‘hostage to fortune’ and also if the company was starting to find life tougher against the value-based superstores.
‘All in all a very backward looking update that we sense could spook the market if management cannot reassure through its near-term investor interaction,’ he suggested.
On a brighter note, positive broker comments lifted a number of blue-chips.
Smith & Nephew rose 3.3% as UBS upgraded to ’buy’ from ’neutral’.
‘With the shares close to five-year lows and below their historic sector discount we believe S&N is cheap,’ the Swiss bank said.
Pearson rose 2.4% as Citi reiterated a ’buy’ rating and opened a 90-day positive catalyst watch.
The broker expects a business and strategic update alongside first-half results in July to ‘formally signal a pivot from value to growth.’
Taylor Wimpey rose 1.6% as Berenberg upgraded to ’buy’ from ’hold’.
In the FTSE 250, WH Smith climbed 1.8% after an upbeat trading statement.
The Swindon, England-based retailer said it remained confident of delivering full-year results in line with expectations as growth in its travel business offset a drop in sales at its high street stores.
WH Smith said sales in the 13 weeks to June 1 in its Travel division rose 9% on a constant currency basis versus the prior year.
As a result, the group is on track for a full year in line with expectations.
Workspace gained 4.0% after increasing the full year dividend to 28.00p, up 8.5% from 25.80p a year prior.
This came as net rental income in the financial year that ended March 31 increased to £126.2 million, up 8.2% from £116.6 million.
Outgoing Chief Executive Officer Graham Clemett said the firm would continue with non-core disposals ‘to further strengthen our balance sheet and invest in our value-add project activity.’
On AIM, Pantheon Resources soared 29% after its 100%-owned subsidiary Great Bear Pantheon signed a gas sales precedent agreement with 8 Star Alaska LLC.
Pantheon said the deal has provided ‘potential additional funding path flexibility.’
Brent oil was quoted at $77.67 a barrel at midday in London on Wednesday, up from $77.01 late Tuesday.
Gold was quoted at $2,335.17 an ounce, up against $2,322.80 at the London close on Tuesday.
Still to come on Wednesday’s economic calendar are the Canadian interest rate decision and the ADP jobs report.
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