9th Oct 2024 12:00
(Alliance News) - Equities in Europe were on the up heading into Wednesday afternoon, shaking off a sell-off in Shanghai, while the focus across the Atlantic is on the release of Federal Reserve meeting minutes later.
The FTSE 100 index was up 21.49 points, 0.3%, at 8,212.10. The FTSE 250 was up 137.16 points, 0.7%, at 20,768.36, but the AIM All-Share rose 1.01 points, 0.1%, to 736.08.
The Cboe UK 100 added 0.3% at 822.38, the Cboe UK 250 climbed 0.8% to 18,253.79, and the Cboe Small Companies fell 0.2% at 16,608.44.
In European equities on Wednesday, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt added 0.2%.
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. The government in Beijing have announced no fresh stimulus measures of note this week, which is also knocking sentiment, however, they will hold a press conference about fiscal policy on Saturday morning," 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.
"There is a chance that nothing of note is announced this Saturday, and instead Beijing waits until next month's National People's Congress to announce new fiscal stimulus measures. China may also want to wait to see how the US election pans out and what the Fed does at its next meeting before pledging more government spending. This could weigh on sentiment towards Chinese shares in the short term."
Trade in China-exposed European equities was mixed. Investor Baillie Gifford China Growth Trust was down 3.7%. Luxury retail was mixed, with Burberry rising 2.0% in London, but LVMH falling 0.1% in Paris.
Miners were largely higher, with Anglo American up 0.8% and Antofagasta rising 1.2%.
Rio Tinto fell 0.4%, however. It said it has agreed 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.
AJ Bell analyst Russ Mould commented: "The fact the deal is also structured purely in cash suggests Rio has learned from others' mistakes. Quite a few takeovers have hit a stumbling block in recent years due to having a cash and shares structure. Investors want cold, hard cash in their hands. Being offered some cash and some shares might not fit their needs, particularly if the acquirer's shares are quoted in a different country than those of the target company."
Rising after an M&A swoop of its own, packaging firm Mondi added 4.1%. The Weybridge, England-based packaging firm will buy the German, Benelux and UK corrugated converting and solid board operations of Schumacher Packaging. Benelux refers to Belgium, the Netherlands, and Luxembourg.
The deal is for an enterprise value of EUR634 million, which will be financed from Mondi's existing facilities.
CMC Markets rose 4.6%. 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.
What's more, 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 2.1%, while peer Pennon fell 0.6%. RBC upgraded United Utilities to 'outperform' from 'sector perform'. It lowered Pennon to 'sector perform' from 'outperform'.
A barrel of Brent fell to USD76.85 early on Wednesday afternoon, from USD77.20 at the time of the European equities close on Tuesday. Gold climbed to USD2,620.15 an ounce from USD2,608.13.
Stocks in New York are called to open lower. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite are each called down 0.1%. Minutes from the Fed's latest meeting are released at 1900 BST.
Brown Brothers Harriman analysts commented: "At the September 17-18 meeting, the Fed delivered an unexpected 50 bp 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 pound was quoted at USD1.3093 early Wednesday afternoon, up from USD1.3084 at the time of the London equities close on Tuesday. The euro climbed slightly to USD1.0966 from USD1.0963. Against the yen, the dollar was trading at JPY148.55, up from JPY148.32.
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.
By Eric Cunha, Alliance News news editor
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