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LONDON MARKET MIDDAY: FTSE 100 pares loss before Powell takes stage

10th Jan 2023 12:21

(Alliance News) - Stock prices in London fell short of producing a mid-morning turnaround but did go into Tuesday afternoon off session lows, though US interest rate worries still cast a dark cloud.

Trading early this week has followed a pattern seen frequently in 2022, with optimism that central bank hawkishness has peaked being doused by tough talk from policymakers.

Two Federal Reserve board members - Mary Daly and Raphael Bostic - on Monday said there is some way to go before the US central bank begins lowering rates. Daly said rates would likely go above 5% before the policy board decides to stop lifting. Bostic tipped a similar level and added that rates would then not be changed for "a long time".

The FTSE 100 index was down 14.14 points, or 0.2%, at 7,710.80 midday Tuesday. It had been down 0.5% earlier in the morning.

The FTSE 250 was down 53.44 points, or 0.3%, at 19,425.95, and the AIM All-Share was 1.23 points, or 0.1%, lower at 848.81.

The Cboe UK 100 was down 0.2% at 771.30, and the Cboe UK 250 was down 0.4% at 16,953.20. The Cboe Small Companies was down 0.2% at 13,726.84.

In European equities on Tuesday, the CAC 40 in Paris was 0.7% lower, while the DAX 40 in Frankfurt lost 0.4%.

"So far this year, there has been increasing hope of a softish landing for the US economy – that hope could be punctured if the Fed retains a hard line on rates. With that in mind, all eyes will be on Fed Chair Jerome Powell when he addresses a conference on central bank independence in Stockholm later," AJ Bell analyst Russ Mould commented.

"Inflation figures out on Thursday also represent a test for the relative optimism of the markets so far this year."

Despite Monday's hardline remarks from Daly and Bostic, traders are still largely pricing in a smaller 25 basis point rate hike by the Federal Reserve next month, according to the CME FedWatch Tool.

That notion will be tested, however, if the US annual inflation rate comes in above the expected 6.5% on Thursday.

At its December meeting, the Federal Open Market Committee lifted the target range for the federal funds rate by 50 basis points to 4.25% to 4.50% - the highest since 2007 - from a previous range of 3.75% to 4.00%.

Powell speaks in Stockholm at 1400 GMT.

The pound was quoted at USD1.2162 midday Tuesday in London, down from USD1.2203 late Monday. The euro stood at USD1.0737, down from USD1.0749. Against the yen, the dollar was trading at JPY132.14, higher from JPY131.88.

In an otherwise underwhelming morning for London-listed blue-chips, insurer Admiral was a notable gainer. Shares rose 2.7% after Deutsche Bank lifted the stock to 'buy' from 'hold'.

At the other end of the FTSE 100, retailer Next lost 2.3%. Investec cut it to 'hold' from 'buy'.

Miners also struggled, with Anglo American among the worst, losing 2.5%. Shares in the sector have been largely on the up this year, due to optimism about revived demand from China. The nation is normally a big buyer of minerals, but repeated lockdowns have crimped this.

Elsewhere in London, Card Factory rose 5.1%. The greeting cards, wrapping and gift card seller said it is trading ahead of expectations.

In the 11 months to December 31, Card Factory says sales surged 28% to GBP432.6 million from GBP337.3 million in the same period a year earlier.

Card Factory now expects annual earnings before interest, tax, depreciation and amortisation of at least GBP106 million, ahead of consensus of GBP96.9 million.

The retailer has noticed a post-Covid shift back to the high street by UK shoppers, partly due to strikes at the Royal Mail discouraging online buying.

Robert Walters fell 3.3%. The recruiter reported an improved fourth quarter, though its performance in China weakened.

Group gross profit grew 11% to GBP105.3 million in the final quarter of 2022 from GBP95.1 million a year earlier.

However, net fee income from Mainland China fell by 24% due to Covid restrictions that were only recently lifted.

Fellow recruiters Hays and SThree lost 5.0% and 4.4%.

Hostmore slumped 17%. The Edinburgh-based owner of the Fridays restaurant chain said like-for-like revenue in the 26 weeks to the start of January was 14% below three years earlier.

"This result was achieved despite the impact of Her Majesty the Queen's passing, national rail strikes, the Football World Cup, and the unusually cold weather during the period," Hostmore explained.

The company said Robert Cook has stepped down as chief executive with immediate effect. Julie McEwan was named interim CEO. She is currently chief operating officer of Fridays.

She has held management roles with Premier Inn and was formerly brand director of Las Iguanas, a Latin American-themed dining chain.

Analysts at finnCap commented: "Today's trading update and news of CEO Robert Cook's departure makes for sober reading"

In New York on Tuesday, the Dow Jones Industrial Average was called to open 0.3% lower, the S&P 500 0.2% lower and the Nasdaq Composite 0.1% lower.

Amazon shares were 0.2% higher in pre-market activity. It has revealed plans to shut three UK warehouses in a move which will impact 1,200 jobs.

The company has launched consultations over the closure of sites in Hemel Hempstead, Doncaster and Gourock, in the west of Scotland.

All workers at the sites will be offered roles at other Amazon locations.

The Seattle, Washington-based online technology company has also revealed plans for two new major fulfilment centres in Peddimore, West Midlands, and Stockton-on-Tees, County Durham, which will create 2,500 jobs over the next three years.

Plunging in the New York pre-market was Virgin Orbit, down 23%. An attempt to make British space history by launching a rocket into orbit from UK soil has ended in failure after suffering an "anomaly" during the flight.

After taking off from Cornwall, the Virgin Orbit plane flew to 35,000 feet over the Atlantic Ocean where it jettisoned the rocket containing nine small satellites towards space.

Organisers of the Start Me Up mission said the rocket – with a variety of civil and defence applications – failed to orbit. In a series of tweets, Virgin Orbit said: "We appear to have an anomaly that has prevented us from reaching orbit. We are evaluating the information."

Early on Tuesday morning, Virgin Orbit issued a statement which said: "Out of five LauncherOne missions carrying payloads for private companies and governmental agencies, this is the first to fall short of delivering its payloads to their precise target orbit."

"While we are very proud of the many things that we have successfully achieved as part of this mission, we are mindful that we failed to provide our customers with the launch service they deserve," Chief Executive Dan Hart added.

Brent oil was quoted at USD79.88 a barrel midday Tuesday in London, down from USD80.46 on Monday. Gold fetched at USD1,875.01 an ounce, up slightly from USD1,874.24.

By Eric Cunha, Alliance News news editor

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