Gains for oil and mining shares moved the FTSE 100 back almost level by midday on Tuesday, but continued concern about the health of the Chinese people and economy kept the market mood subdued.
The index of London large-cap stocks was down just 4.03 points, 0.1%, at 7,357.28. The FTSE 250 was down 122.89 points, 0.7%, at 18,526.07, and the AIM All-Share was down 2.58 points, 0.3%, at 820.96.
The Cboe UK 100 was down 0.2% at 735.87, the Cboe UK 250 was down 0.8% at 15,994.68, and the Cboe Small Companies was marginally lower at 12,844.22.
European equities also bounced off morning lows on Tuesday. The CAC 40 in Paris was down 0.4% in early afternoon trade, while the DAX 40 in Frankfurt was down 0.3%.
Stocks in New York were called to open mostly lower. The Dow Jones Industrial Average was called flat, the S&P 500 index down 0.1%, and the Nasdaq Composite down 0.3%.
After the unexpectedly hawkish rhetoric from the US Federal Reserve and the European Central Bank last week, the central bank shocks continued on Tuesday. The forex market was still digesting a surprise move from the Bank of Japan. Early Tuesday, the normally dovish central bank unexpectedly decided to expand the range for its ten-year yields.
‘It is not what the BoJ did this morning that has caused waves in the market, but the fact that it did something that has taken investors by surprise and whetted the appetite of speculators,’ Rabobank commented.
The dollar dropped to JP¥132.35 versus JP¥137.00 late Monday. The yen was at its strongest since August.
‘We continue to believe that the fundamental outlook still favours the dollar but the BOJ has thrown a spanner in the works,’ said Brown Brothers Harriman. ‘Let’s wait a bit to see how this surprise works its way through the markets but it’s clear that at the very least, our 2023 forecasts for USD/JPY will have to be marked lower as the timetable for BOJ liftoff has been moved forward.’
Sterling was quoted at $1.2169, edging up from $1.2160 at the London equities close on Monday. The euro traded at $1.0642, up from $1.0608.
In the FTSE 100, miners were helping prevent deeper losses. Antofagasta was up 1.6%, Glencore was up 1.5% and Fresnillo added 1.0%.
Gold was quoted at $1,807.80 an ounce at midday on Tuesday in London, higher than $1,787.77 late on Monday.
Optimism around the continued relaxation of Covid-19 restrictions in China buoyed sentiment for commodities, despite the latest resurgence in coronavirus cases in the world’s second largest economy.
Oil majors BP and Shell added 0.5% each, while Brent oil fetched $79.96 a barrel at midday in London, little changed from $79.85 late Monday.
In the FTSE 250, Wag Payment Solutions - known as Eurowag - added 2.0%.
It has agreed to acquire the remaining 30% interest in Sygic for around €14.4 million. It bought a 70% stake in the Slovak automotive navigation systems firm back in 2019.
The transport-focused payment services firm also provided an update on its proposed purchase of Grupa Inelo, noting it has received approvals in North Macedonia and Slovenia. The Polish anti-trust authority also has given the nod to the deal.
Eurowag will send out a circular in early 2023, and expects completion to occur in the first quarter.
Small-cap energy services stock Petrofac fell 10%.
The London-based company provides services in oil, gas, refining, petrochemicals and renewable energy infrastructure. It expects a group loss before interest and tax of around $100 million in 2022, due to a $190 million loss in its Engineering & Construction business.
Petrofac said this was due to adverse commercial settlements and unrecovered cost overruns in its legacy contract portfolio, alongside cost increases on its Thai Oil clean fuel joint-venture contract.
On AIM, Xpediator jumped 20%.
The freight management firm said it has been approached by a consortium, including its former chief executive, Stephen Blyth, for a potential takeover offer.
The consortium proposes a possible cash offer at 42p per Xpediator share, which is a 39% premium to its closing price on Monday of 38.84p. The consortium has support from the company’s largest independent shareholders, who hold a 27% stake.
‘The Xpediator board has granted the consortium access to due diligence materials and the consortium’s due diligence is well advanced,’ the firm says.
‘There is a growing risk that if the market isn’t prepared to put a fair valuation on a company, then someone will come along and buy it. Increasingly, this someone is either the founder or a former director and that’s exactly what is happening with transport group Xpediator,’ remarked Russ Mould, investment director at AJ Bell.
Still to come on Tuesday’s economic calendar, there is flash EU consumer confidence at 1500 GMT.
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