9th Oct 2024 17:07
(Alliance News) - London's blue-chip index rebounded on Wednesday to close in the green, shrugging off heavy falls in Shanghai, ahead of key events across the pond.
The FTSE 100 index closed up 53.13 points, 0.7%, at 8,243.74. The FTSE 250 ended 191.18 points higher, 0.9%, at 20,822.38, and the AIM All-Share rose 1.59 points, 0.2%, to 736.66.
The Cboe UK 100 rose 0.6% 825.37, the Cboe UK 250 closed up 1.0% at 18,281.39, but the Cboe Small Companies eased 0.2% at 16,604.10.
London's positive mood was reflected in Europe. The CAC 40 in Paris closed up 0.5%, while the DAX 40 in Frankfurt ended 1.0% higher.
It was another eventful trading session in China, where the Shanghai Composite slumped 6.6%.
"Chinese stocks sold off sharply during the Asia session, as reports that Chinese consumers spent less during the recent Golden Week holiday knocked confidence," XTB analyst Kathleen Brooks commented.
Investor confidence in China is fragile, on worries that stimulus measures announced prior to the Golden Week period are not enough to get the Asian economy firing again.
Brooks added: "The risk is that unless China engages in a more radical package of fiscal reforms to boost government handouts, the stimulus announced so far may not be enough to sustain a long-term pick up in economic growth and domestic demand."
Despite the latest turbulence in China, mining stocks held up well after falling heavily on Tuesday.
Anglo American rose 1.2%, Glencore climbed 0.8% and Antofagasta advanced by 0.5%.
Rio Tinto edged up by 0.1% after agreeing to buy Arcadium Lithium, creating a "global leader in energy transition commodities".
The deal values the lithium producer at USD6.7 billion, London-based metals processing and mining company Rio said.
Rio will pay USD5.85 in cash per share, a 90% premium to New York-listed Arcadium's closing price of USD3.08 at the end of last week. Rio Tinto had announced a possible approach for Arcadium on Monday.
Berenberg explained Rio has been looking at lithium assets for some time and so the deal does not come as a surprise.
The broker felt the price paid appears to be fairly full in a sector that is broadly on its knees due to weak lithium price performance.
"However, the deal is counter-cyclical, and we think that the timing is sensible; if management is proven right on the direction of price, it could well be a good deal."
In New York, markets were higher at the time of London's close. The Dow Jones Industrial Average was up 0.8%, the S&P 500 rose 0.6% and the Nasdaq Composite climbed 0.5%.
Later on Wednesday, the minutes of the September Federal Open Market Committee meeting will be released. At that meeting, the Federal Reserve lowered interest rates by 50 basis points, easing monetary policy for the first time in four years, citing progress on the Fed's dual mandate. This lowered the interest rate target to a range of 4.75% to 5%.
Brown Brothers Harriman analysts commented: "At the September 17 to 18 meeting, the Fed delivered an unexpected 50 basis points cut. Only Governor [Michelle] Bowman dissented in favour of a smaller 25 bp cut, which means virtually the entire [Federal Open Market Committee] was on board with Powell. That said, Fed official comments since the decision have largely tilted more cautious and so the minutes may reveal that other Fed officials were resistant to a 50bp before being convinced to vote with the majority."
The minutes come ahead of US consumer price inflation figures on Thursday as investors weigh the Fed's next move.
Back in London, and leading the blue-chip risers was packaging firm Mondi, which added 4.0%.
The Weybridge, England-based company will buy the German, Benelux and UK corrugated converting and solid board operations of Schumacher Packaging.
The deal is for an enterprise value of EUR634 million, which will be financed from Mondi's existing facilities.
"This acquisition is a sensible, EPS-accretive bolt-on and shows further consolidation of the fragmented European packaging market," said analysts at Davy Research.
CMC Markets fell 0.5% giving up early gains. It expects to report a swing to first-half profit, as the provider of online financial trading hailed its "diversification strategy".
For the half-year to September 30, it expects to report pretax profit of GBP51 million, swinging from a loss of GBP2 million.
Net operating income of around GBP180 million is expected, up 45% from GBP123 million a year prior.
In addition, CMC expects to report operating costs of GBP113 million for the first half, trimmed from GBP122 million a year prior. The cost figure excludes "variable remuneration and non-recurring charges".
Water utility United Utilities added 1.7%, while peer Pennon fell 1.1%. RBC upgraded United Utilities to 'outperform' from 'sector perform'. It lowered Pennon to 'sector perform' from 'outperform'.
"We switch to United Utilities as our preferred play in the water space given our view on upside potential into the [final UK regulatory determination] and a strong balance sheet position, whilst Pennon's updated capex guidance means the balance sheet comes under pressure," the broker said in a note to clients.
The pound was quoted at USD1.3080 late on Wednesday afternoon in London, down slightly from USD1.3084 at the equities close on Tuesday.
Meanwhile, the euro eased to USD1.0948, down against USD1.0963.
The European Central Bank will very likely make its third interest rate cut of the year next week as inflation is coming under control, an ECB governing council member said Wednesday.
The odds of a rate cut at the ECB's October 17 meeting rose after eurozone inflation slowed to 1.8% in September, falling below its 2% target for the first time since 2021.
"Victory against inflation is in sight," Francois Villeroy de Galhau, who heads France's central bank and sits on the ECB governing council, told franceinfo radio.
"A cut is very likely," he said, adding: "By the way, it will not be the last."
As to the size of the cut, he said the ECB was "used to acting gradually... without taking too large steps" – signalling that policymakers would again opt for a cut of 25 basis points.
Meanwhile, Germany's gross domestic product is expected to decline by 0.2% in 2024, according to a revised government forecast, meaning Europe's biggest economy is on course for recession.
The revised figures presented by Economy Minister Robert Habeck were down from previous estimates of 0.3% growth.
The revised forecast does not come as a surprise as the country's leading economic research institutes recently also adjusting their forecasts downwards, with GDP for the year expected to decline by 0.1%.
Against the yen, the dollar was trading at JPY149.23, up compared to JPY148.32.
Worries over waning demand from China put the price of oil under pressure. Brent oil was quoted at USD76.54 a barrel in London on Wednesday, down from USD77.20 late Tuesday.
Gold was quoted at USD2,613.66 an ounce late Wednesday, higher against USD2,608.13.
Thursday's economic calendar sees US CPI and weekly jobless claims figures.
By Jeremy Cutler, Alliance News reporter
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