With the US Federal Reserve set to begin a week dominated by three central bank decisions this evening, investors in London demonstrated confidence at midday on Wednesday.
This was despite downbeat gross domestic product data in the UK.
The FTSE 100 index was up 22.62 points, 0.3%, at 7,565.39. The FTSE 250 was up 38.22 points, 0.2%, at 18,700.34, and the AIM All-Share was up 1.91 points, 0.3%, at 725.82.
The Cboe UK 100 was up 0.2% at 755.17, the Cboe UK 250 was flat at 16,174.50, and the Cboe Small Companies was down 0.1% at 14,053.94.
In European equities on Wednesday, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt was up 0.1%.
Investors on Wednesday were let down by ‘dismal’ data from the UK, which reignited fears of a recession.
In early economic news, UK GDP fell by 0.3% on-month in October, having risen by 0.2% a month earlier. This was worse than expected. According to FXStreet market consensus, analysts were expecting GDP to fall by just 0.1% in October.
‘Some of the factors responsible for the dismal economic performance in October won’t be repeated. Screen writers and actors have ended their walkout, which means action can resume on sets that had been dark. Consultants have reached a deal with the government, which could mean an end to at least some of the disruption that’s crippled the NHS. And people are finally getting to a checkout and finding their weekly shop has only gone up by a few pennies, rather than the pounds they’ve come to expect,’ said AJ Bell’s Danni Hewson.
‘But even if the UK does continue to dodge recession, real growth is likely to prove elusive for at least the next year.’
It wasn’t long though until analysts quickly turned their eyes to interest rate decisions. The data brought forward expectations for interest cuts by the Bank of England.
‘While the continued economic contraction may present the BoE with more challenges in light of its insistence on keeping interest rates at high levels for an extended period to combat inflation,’ said XS.com’s Samer Hasn.
‘However, the continuation of upward risk of inflation may put the central bank before two options: either keeping rates relatively high and pushing for a further decline in economic activities to curb inflation, or cutting interest rates earlier than necessary to revive the economy, which may lead to igniting inflation again.’
The BoE will announce its interest rate decision on Thursday 1200 GMT, followed by the European Central Bank shortly after.
Before then, however, is the main event of Wednesday. The US Federal Reserve will announce its latest interest rate decision at 1900 GMT and a press conference with Fed Chair Jerome Powell will follow half an hour later.
Markets are expecting the Fed to keep interest rates unchanged, alongside the BoE and ECB.
‘Interest rates are expected to remain unchanged, however, expectations over the start of interest rate cuts could be affected, which could fuel some volatility in the market. The Federal Reserve’s economic projections and dot plot could provide some hints about the next steps in monetary policy and could drive markets’ direction,’ said Wael Makarem at Exness.
Stocks in New York were called to open slightly higher ahead of the decision. The Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite are all called to edge up 0.1%.
The pound was quoted at $1.2517 at midday on Wednesday in London, down compared to $1.2549 at the equities close on Tuesday. The euro stood at $1.0774, lower against $1.0789. Against the yen, the dollar was trading at JP¥145.69, up slightly compared to JP¥145.60.
In the FTSE 100, Entain was the best performer of the morning, up 4.6%.
Entain said its chief executive will step down from the post, and shares in the Ladbrokes Coral owner leapt in response, suggesting investor patience in Jette Nygaard-Andersen was wearing thin.
Entain said Nygaard-Andersen’s decision to leave comes after the company entered into a deferred prosecution agreement with the UK Crown Prosecution Service in relation to bribery offences at its former Turkish firm.
HM Revenue & Customs launched in investigation into Entain in 2019. Entain faced allegations relating to bribery offences at its former Turkish unit, sold by a management team in 2017.
In the FTSE 250, Volution rose 5.1%.
The West Sussex-based designer and manufacturer of energy-efficient indoor air quality solutions said revenue in the four months ended November 30 was about £121 million, up 8.0% from a year ago.
Looking ahead, Volution said its ‘strong’ start to the financial year, paired with the tailwind from the three acquisitions completed in the calendar year, has given the board confidence in delivering earnings ahead of the current range of market expectations for the financial year.
Meanwhile, Paragon Banking rose 2.1%, after RBC raised its stock to ’outperform’.
Amongst, London Main Market small-caps, GCP Asset Backed Income Fund jumped 6.1%.
It announced a strategic review, with options including but not limited to being acquired or wound down.
The London-based investor, which backs medium to long-term fixed or floating rate loans secured against physical assets or cash flows, said the strategic review follows the cessation of merger discussions with GCP Infrastructure Investments. The two companies ended combination talks in mid-September.
On London’s AIM, Impellam shares rose 31% to 847.55 pence each.
Impellam said it has agreed to a £483.2 million takeover offer from Heather Global, a bidding vehicle for HeadFirst Global.
Impellam is a Luton, England-based staffing firm. Hoofddorp, Netherlands-based HeadFirst provides HR solutions, managed services and business consultancy.
The HeadFirst offer values each Impellam share at 1,084.4 pence in total. This represents a 67% premium over the stock’s 650.00p close in London on Tuesday.
Impellam said the terms of the deal are ‘fair and reasonable’, and its directors intend to recommend that shareholders vote in favour of the takeover.
Brent oil was quoted at $73.30 a barrel at midday in London on Wednesday, down from $73.61 late Tuesday. Gold was quoted at $1,982.75 an ounce, up slightly against $1,982.30.
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