3rd Nov 2021 12:02
(Alliance News) -Â Caution was in the air ahead of the US Federal Reserve's latest monetary policy decision on Wednesday, with a formal QE taper announcement all but guaranteed.
London's blue-chip FTSE 100 was underperforming at midday, dragged down by share price losses for Darktrace, Next and Coca-Cola HBC.
The FTSE 100 index was down 20.41 points, or 0.3%, at 7,254.40 on Wednesday. The mid-cap FTSE 250 index was down 47.95 points, or 0.2%, at 23,092.05. The AIM All-Share index was down 0.79 points, or 0.1%, at 1,226.80.
The Cboe UK 100 index was down 0.3% at 718.98. The Cboe 250 was down 0.4% at 20,636.40 and the Cboe Small Companies down 0.2% at 15,546.63.
In mainland Europe, the CAC 40 in Paris was up 0.1% while the DAX 40 in Frankfurt was flat early afternoon on Wednesday.
European markets were drifting ahead of Wednesday's Fed decision.
"Today heralds the beginning of a three-day period which will see jobs and monetary policy dominate sentiment, with the Bank of England and Federal Reserve both expected to begin removing their accommodative position thanks to surging inflation," said Joshua Mahony, senior market analyst at IG.
The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1800 GMT. This will be followed by a press conference with Fed Chair Jerome Powell at 1830 GMT.
The Fed is expected to make a long-awaited formal announcement that it will taper its quantitative easing programme, against a backdrop of heightened inflation pressures.
A move this week was all but confirmed by Powell on Friday, when he said the central bank is "on track" to begin to pull back on its massive monthly bond purchases, which would be completed by mid-2022, he said. But "it would be premature to actually tighten policy by raising rates now with the effect and intent of slowing job growth."
Analysts think the Fed's USD120 billion a month in bond purchases will be reduced by USD15 billion.
The Bank of England follows the Fed on Thursday, while the US nonfarm payrolls report for October is due on Friday.
Ahead of the US central bank decision, Wall Street is called for a subdued start. The Dow Jones Industrial Average and S&P 500 both are pointed down 0.1%, but the Nasdaq Composite is called up 0.1%.
The dollar was trading slightly lower into the Fed announcement.
Sterling was quoted at USD1.3625 on Wednesday, slightly higher than USD1.3614 at the London equities close on Tuesday. The euro traded at USD1.1584, marginally firm on USD1.1580 late Tuesday. However, against the yen, the dollar edged up to JPY113.84 versus JPY113.81.
Gold was quoted at USD1,782.78 an ounce, down from USD1,788.90 on Tuesday. Brent oil was trading at USD82.90 a barrel, down from USD84.09 late Tuesday.
While there was caution across markets on Wednesday, the FTSE 100 was underperforming Europe on a drag from constituents Darktrace, Next and Coca-Cola HBC.
Darktrace fell 5.1%. A fund managed by Vitruvian Partners has sold 11.0 million shares in cybersecurity firm Darktrace at a price of 580 pence each, raising GBP63.8 million. The price was an 8.3% discount to Darktrace's closing price of 632.5p on Tuesday.
The sale, first announced after the market close on Tuesday, was carried out by Deep Defence, a wholly-owned subsidiary of Vitruvian Investment Partnership III, a fund managed by Vitruvian Partners. Vitruvian will retain just shy of a 3% stake in Darktrace following the placing and has agreed to a 60-day lockup for these shares. Darktrace will not receive any of the placing proceeds.
Next shares eased 3.8% after the retailer left its annual profit outlook unchanged. The retailer warned a recent surge in full price sales will ebb as pent-up demand wanes, with the UK consumer facing accelerating costs of essential goods. In the third quarter to October 30, Next said full price sales, including interest income, rose 17% from pre-virus levels.
Next noted pent-up demand is "likely to continue to diminish", while supply chain challenges mean stock availability is an issue. In addition, consumers face rising costs from elsewhere, potentially limiting their spending on non-essentials.
Coca-Cola HBC was down 2.5%. The soft drinks bottler said it is on track to achieve its full-year revenue guidance despite a "challenging cost environment".
The Zug, Switzerland-based soft drinks bottler said the summer season drove currency-neutral revenue up by 17% to EUR2.12 billion in the three months to September 30 from EUR1.81 billion a year before. In the nine months to the end of September, currency-neutral revenue was up 19% year-on-year to EUR5.37 billion.
In the green was British Airways-parent International Consolidated Airlines, up 3.3% on a positive read-across from German flag carrier Lufthansa.
Lufthansa said it was back in the black in the third quarter of this year – for the first time since the start of the coronavirus pandemic – as restrictions are lifted and air travel takes off again. The airline said its revenue almost doubled in the period from July through September, and it posted a small underlying, or operating, profit of EUR17 million, compared with a loss of EUR1.3 billion a year earlier.
IAG puts out its own third-quarter results on Friday.
Micro Focus topped the FTSE 250, up 7.6%, while Trainline was the worst performing mid-cap, down 9.1%.
Micro Focus said it has agreed to sell its archiving and risk management portfolio in a USD375 million deal. The assets, collectively known as Digital Safe, will be sold to Portland, Oregon-based Smarsh, an electronic communications archiving firm.
Trainline said its pretax loss narrowed to GBP10.3 million in the six months to August 31 from GBP44.7 million a year before.
Looking ahead, Trainline is guiding for net sales between GBP2.4 billion and GBP2.8 billion. In financial 2021, which ended February 28, 2021, the firm's net ticket sales were GBP783 million but stood at GBP3.73 billion in financial 2019.
Cairn Energy was up 3.3% after saying it is working with the Indian government to claim its USD1.06 billion tax refund. Cairn will start to file the necessary documents and is working with the state to expedite the refund within the process of the Tax Amendment Act Rules.
Elsewhere in London, Zotefoams rose 14% after reporting record third quarter sales performance, with revenue up 11% year-on-year and surging 35% on 2019.
Besides the Fed, the economic events calendar on Wednesday has a services PMI from the US at 1345 GMT. There is US ADP hiring data at 1215 GMT.
By Lucy Heming;Â [email protected]
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