15th Jan 2020 12:06
(Alliance News) - London stocks edged into the green at midday on Wednesday as investors pondered how to trade the 'phase one' US-China trade deal set to be signed later in the day.
"The big day has arrived and investors are, well, not quite sure what to do and whether there's actually much cause for excitement yet," said Craig Erlam at Oanda.
"European stocks are mostly treading water while US futures are marginally lower following a lacklustre start to the week," he continued. "We've been waiting for the signing ceremony for so long but there is a worry that, despite details of the deal being largely concealed, what we are hearing is a little underwhelming and may be already priced in, maybe even too much."
Meanwhile, the pound recovered after data showed UK inflation slumped to a three-year low in December.
The FTSE 100 index was up 7.02 points, or 0.1%, at 7,629.37. The FTSE 250 was down 44.53 points, or 0.2%, at 21,711.52, and the AIM All-Share was up 0.2% at 971.43.
The Cboe UK 100 was flat at 12,925.93, the Cboe UK 250 was down 0.2% at 19,624.41, and the Cboe Small Companies down 0.5% at 12,431.61.
In European equities on Wednesday, the CAC 40 in Paris and DAX 30 in Frankfurt both were down 0.2%.
The world's two dominant economic powers, the US and China, are poised to sign a trade truce Wednesday.
However, the most difficult issues remain to be dealt with in "phase two" negotiations, including massive subsidies for state industry and forced technology transfer. And even the achievements in the deal take the relationship back to where it was before US President Donald Trump took office, restoring elements he scrapped.
US Treasury Secretary Steven Mnuchin dismissed a Bloomberg report that the initial agreement could include provisions to roll back more tariffs on China after the election.
"The tariffs will stay in place until there is a phase two. If the president gets phase two quickly, he will consider releasing tariffs. If not, there won't be any tariff relief," Mnuchin said on Bloomberg TV.
Stocks in the US were called for a lower start on Wednesday, with the Dow Jones, S&P 500 and Nasdaq all called down 0.1%.
In the US economic calendar are producer prices at 1330 GMT, while on the corporate side there are earnings out already from Bank of America and BlackRock.
Bank of America reported a slight decline in fourth-quarter revenue, while BlackRock's rose strongly. The investment manager also revealed a 24% rise in assets under management in all of 2019.
Investment bank Goldman Sachs is scheduled to follow at 1230 GMT.
In the UK, the latest inflation data disappointed.
The annual inflation rate in December was 1.3%, decelerating from 1.5% in November and below expectations, according to FXStreet, for the rate to remain stable. December's reading marked the lowest annual inflation rate in the UK since November 2016.
The pound was quoted at USD1.3018 at midday Wednesday, firm compared to USD1.3003 at the close on Tuesday. Sterling had fallen below USD1.30 immediately after the release of the CPI data, though since recovered.
Following the CPI print, Saxo Markets said the next Bank of England policy meeting, on January 30, is "live".
"More MPC members are singing the same dovish tune with Vlieghe, an influential external member, being the last to break silence and pledge to vote for a rate cut should the UK economy fail to bounce in Q1 2020. All data are closely monitored this month. UK CPI printed below expectations this morning, confirming the recent trend of muted inflation and overall softer data. The MPC meeting seems more 'live' than ever in January with a 62% probability (from 50% yesterday) for a 25bps rate cut," said Olivier Konzeoue, FX sales trader at Saxo Markets.
Adding to the rate-cut drumbeat on Wednesday was Monetary Policy Committee member Michael Saunders, who has voted for a rate cut at the past two BoE meetings. Speaking in Northern Ireland, he noted that economic growth has slowed "markedly" over the last year, both at home and abroad.
"To sum up on the current situation, economic growth is sluggish, spare capacity is rising, while inflation is subdued. The economy still has a slow puncture, and this seems to be spreading to the labour market. Unless prospects for demand improve very quickly, some increases in unemployment (or under-employment) seem likely in the next few quarters," he said.
It may be appropriate to cut interest rates further, Saunders added.
Elsewhere in Europe, preliminary data showed the German economy grew at a sharply slower rate in 2019.
German gross domestic product expanded 0.6% in 2019, less than half the rate of 1.5% seen in 2018. This did, though, mark the tenth year in a row the German economy has expanded, representing the longest period of growth for the united Germany.
2019's growth rate was the slowest since 2013, however, when the economy eked out a rise of just 0.4%.
The euro stood at USD1.1149 at midday Wednesday, higher against USD1.1127 late Tuesday.
Against the yen, the dollar was trading at JPY109.85 compared to JPY110.07 late Tuesday.
In commodities, Brent oil was quoted at USD64.34 a barrel midday Wednesday from USD64.70 late Tuesday. Gold was quoted at USD1,552.50 an ounce against USD1,542.80 at the close on Tuesday.
In London, the FTSE 100 had tipped into the green by midday.
Hargreaves Lansdown was up 1.1% after Berenberg started the fund supermarket with a Hold rating.
Housebuilder Persimmon was up 1.1% as well. It said profit for 2019 will meet market expectations.
In the year to December 31, revenue is expected to come in at GBP3.65 billion, a 2.4% decline from GBP3.74 billion last year. Persimmon entered 2020 with forward sales totalling roughly GBP1.36 billion, 2.9% down year-on-year from GBP1.40 billion.
Towards the bottom of the blue-chip index was Royal Bank of Scotland, dipping 2.3% after Barclays cut the state-backed lender to Underweight from Equal Weight.
Sat atop the FTSE 250 at midday was Provident Financial, up 5.9% after backing market consensus for its 2019 profit.
According to Provident, market consensus is for pretax profit before amortisation of acquisition intangibles and exceptional items of GBP162 million, with a range of GBP155 million to GBP166 million, based on forecasts from 12 equity research analysts.
The doorstep lender said its 2019 fourth-quarter results aligned with the firm's internal plans, with its Vanquis Bank subprime credit card business results modestly exceeding expectations as a result of "favourable delinquency and tight cost control".
However, while Moneybarn, its sub-prime auto loans business, did produce "attractive receivables growth" in the fourth quarter, it "performed modestly below internal plan" as a consequence of higher impairment.
Outsourcer Capita rose 2.6% after Goldman Sachs raised the stock to Conviction Buy from Buy.
Hochschild Mining advanced 2.3% despite reporting a mixed performance in the final quarter of 2019.
The FTSE 250-listed silver and gold producer said its gold production was 78,050 ounces in the three months to the end of 2019, down 4.1% compared to 81,370 ounces mined in the prior quarter, but up 6.8% from 73,100 ounces produced a year ago. This was driven by a "better than expected" performance from the Inmaculada mine in Cusco, Peru.
In terms of silver, production in the fourth quarter was 12% lower, at 4.6 million ounces, versus 5.3 million delivered in the third quarter of 2019. Year-on-year, silver output slipped even more, by 20%.
Overall 2019 production was 570,500 gold equivalent ounces and 46.2 million silver equivalent ounces, both down 3.0% year-on-year.
By Lucy Heming; [email protected]
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