The FTSE 100 closed higher on Wednesday, as mining stocks listed in London were buoyed by positive manufacturing data from China.
Meanwhile, the pound dropped back sharply below $1.21 as sterling’s rally lost steam following cautious words from Bank of England Governor Andrew Bailey.
The FTSE 100 index closed up 38.65 points, or 0.5% at 7,914.93 on Wednesday. The FTSE 250 ended down 32.68 points, or 0.2%, at 19,870.60. The AIM All-Share closed up 1.17 points, or 0.1%, at 860.54
The Cboe UK 100 ended up 0.4% at 791.94, the Cboe UK 250 closed down 0.2% at 17,419.97, and the Cboe Small Companies ended up 0.4% at 13,875.09.
The pound was quoted at $1.1994 at the London equities close on Wednesday, down significantly from $1.2118 at the close on Tuesday.
In a speech on Wednesday, Bailey said ‘nothing is decided’ as far as interest rates go.
‘At this stage, I would caution against suggesting either that we are done with increasing bank rate, or that we will inevitably need to do more. Some further increase in bank rate may turn out to be appropriate, but nothing is decided,’ Bailey said.
Last month, the BoE lifted the bank rate by 50 basis points to 4.00% from 3.50%. It next decides on interest rates on March 23.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said it was clear from Bailey’s speech that the committee is placing more emphasis on the ‘substantial tightening already delivered’ and would ‘like to call time on its hiking cycle as soon as it feasibly can.’
‘It makes little sense at present, therefore, to price-in a terminal rate at 4.5% or higher as a base case,’ he added.
In London, mining stocks crowned the FTSE 100 on Wednesday, buoyed by unexpectedly strong data out of China.
Survey results showed that China’s factories returned to growth in February, amid the loosening of pandemic restrictions.
The Caixin manufacturing purchasing managers’ index rose to 51.6 points in February from 49.2 in January. Crossing over the 50-point no-change mark, it shows the sector is now in a state of modest growth.
The latest reading on the strength of China’s factory sector was better than the market consensus forecast of 50.2, as cited by FXStreet.
Bill Weatherburn, commodities economist at Capital Economics, said the data points to higher metals and crude oil demand from China.
‘While growth should moderate over the second half of year, it still points to higher metals and crude oil demand. Overall, the PMI surveys suggest that the risks to China’s commodities demand are tilted to the upside,’ he said.
Brent oil was quoted at $83.78 a barrel at the London equities close on Wednesday, up from $83.50 late Tuesday. Gold was quoted at $1,838.50 an ounce, sharply higher against $1,827.19.
Amid the demand optimism, Rio Tinto jumped 4.7%, Antofagasta climbed 4.2%, Endeavour Mining added 4.0%, Glencore rose 3.4%, and Anglo American finished 3.6% higher.
Meanwhile, housebuilders were among the worst performers in the FTSE 100 on Wednesday as UK house price saw their sixth consecutive monthly fall.
On a monthly basis, the Nationwide house price index fell 0.5% in February from January, slowing slightly from a 0.6% decline in January from December.
AJ Bell analyst Russ Mould said that falling property prices and rising costs means ‘profits are being squeezed’ for housebuilders, which in turn, will cause earnings in the sector to ‘slump’.
‘Investors have been pricing in a sharp downturn in the housing sector for months, but each new data point showing further cracks in the industry has only served to take share prices even lower,’ Mould added.
Taylor Wimpey dropped 4.3% and Barratt Developments fell 4.4% amid concerns for the housing sector.
Persimmon, meanwhile, plunged 12%. The stock was also weighed by poor annual results on Wednesday, as it warned of a tough year and halved its annual dividend.
The York-based housebuilder cautioned that margins could be hit by around 500 basis points by lower average selling prices and cost inflation, with another 800 basis point hit from reduced volumes and increased sales incentives and marketing costs.
In the FTSE 250, Aston Martin Lagonda Global finished 3.2% higher as it hailed its ‘strongest order book in many years’.
The luxury carmaker’s revenue rose 26% to £1.38 billion from £1.10 billion, though its pretax loss widened to £495.0 million from £213.8 million.
Its bottom-line was hurt by a non-cash foreign exchange charge of £156 million amid a revaluation of dollar debt.
Aston Martin said it was profitable in the final quarter, however, reporting pretax profit of £16.3 million and swinging from a £25.2 million loss.
Elsewhere in London, International Personal Finance jumped 16% as it reported its annual profit and revenue were both up, prompting it to declare an increased total dividend for 2022.
The Leeds, England-based company which offers small, unsecured cash loans said 2022 pretax profit rose 14% to £77.4 million from £67.7 million in 2021. Revenue increased by 18% to £645.5 million from £548.7 million.
As a result, it lifted its total annual dividend by 15% to 9.20p per share from 8.00p in 2021.
In European equities on Wednesday, the CAC 40 in Paris ended down 0.5%, while the DAX 40 in Frankfurt ended 0.4% lower.
The euro stood at $1.0663 at the European equities close on Wednesday, higher against $1.0613 at the same time on Tuesday. Against the yen, the dollar was trading at JP¥136.15 late Wednesday, slightly higher compared to JP¥136.11 late Tuesday.
Stocks in New York were firmly in the red at the London equities close, with the Dow Jones Industrial Average down 0.4%, the S&P 500 index down 0.7%, and the Nasdaq Composite down 0.9%.
In Thursday’s UK corporate calendar, there are full year results from London Stock Exchange Group, ITV, Haleon, and National Express.
In the economic calendar, the EU will publish unemployment and inflation data at 1000 GMT. The US will also publish its weekly unemployment claims report at 1330 GMT.
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