16th Feb 2022 09:00
(Alliance News) - London's FTSE 100 stock index edged cautiously higher in early dealings on Wednesday, with a seeming de-escalation by Russia of its threat to Ukraine lifting the mood, though traders were wary about a backdrop of inflationary pressures in both the UK and US.
Buying of blue-chip equities elsewhere in Europe and in Asia showed more confidence.
Eased tensions on the Russia-Ukraine border supported travel stocks. Russia's ambassador to the European Union ruled out an attack on Wednesday.
The FTSE 100 index was up 12.77 points, or 0.2%, at 7,621.69. The mid-cap FTSE 250 index was up 69.99 points, or 0.3%, at 21,922.50. The AIM All-Share index was up 4.01 points, or 0.4%, at 1,082.56.
The Cboe UK 100 index was up 0.4% at 756.24. The Cboe 250 was up 0.4% at 19,608.49, and the Cboe Small Companies up 0.1% at 15,485.86.
In mainland Europe, the CAC 40 in Paris climbed 0.7%, while the DAX 40 in Frankfurt was 0.3% higher.
"One of the twin pressure valves gripping the market has been slightly released, while the other remains strongly in evidence," Interactive Investor analyst Richard Hunter commented.
"The withdrawal of some Russian troops seems to have been accompanied by comments that the door remained open for diplomatic discussions, which was sufficient to prompt a relief rally. On the other hand, the current elevated level of inflation remains a real concern on both sides of the pond."
The UK's annual inflation figure raced to just shy of a 30-year high in January, figures from the Office for National Statistics showed Wednesday.
The UK's yearly inflation rate accelerated to 5.5% in January from 5.4% in December. The figure topped market estimates cited by FXStreet, which had forecast inflation to remain steady in January.
January's figure was the hottest since the current series began in 1997. It is the chunkiest inflation figure since a historic series registered 7.1% in March 1992.
Still to come on Wednesday's economic calendar is a eurozone industrial production reading at 1000 GMT, US retail sales at 1330 GMT, and minutes from the Federal Reserve's most recent meeting at 1900 GMT.
The dollar was mixed on Wednesday.
The pound was quoted at USD1.3558 early Wednesday, up from USD1.3535 at the London equities close on Tuesday. The euro stood at USD1.1379, firm on USD1.1365. Against the yen, the dollar was trading at JPY115.76, up from JPY115.70.
Equities in Asia closed higher on Wednesday. The Nikkei 225 in Tokyo ended up 2.2%, while the S&P/ASX 200 in Sydney added 1.1%. The Shanghai Composite closed up 0.6%, and the Hang Seng in Hong Kong 1.5% higher.
Inflation slowed in China in January. The producer price index rose 9.1% on-year, according to the National Bureau of Statistics, tracking falls in coal and steel prices. It was below the 9.5% forecast in a Bloomberg survey of economists, and marked the third straight month of PPI easing. It was 10.3% in December.
The consumer price index in China rose 0.9% year-on-year in January. That too was below analysts' expectations and down from December, when it came in at 1.5%.
Russia's ambassador to the European Union, Vladimir Chizhov, has rejected US warnings of a possible Russian attack on Ukraine on Wednesday.
Russia on Wednesday said military drills in Moscow-annexed Crimea had ended and that soldiers were returning to their garrisons, a day after it announced a first troop pullback from Ukraine's borders.
State television showed images of military units crossing a bridge linking the Russia-controlled peninsula to the mainland.
The statement said tanks, infantry vehicles and artillery were leaving Crimea by rail.
But Western leaders remain concerned that Russia could still launch an attack on Ukraine, with US President Joe Biden warning on Tuesday that an attack by Moscow remained "very much a possibility".
Analysts at Lloyds Bank commented: "News that Russia has announced a partial pulling back of troops lined up near the Ukrainian border has provided a positive backdrop for risk sentiment. In particular, most major equity indices across the Asia Pacific region are trading higher this morning."
London-listed travel stocks were on the up. British Airways parent International Consolidated Airlines and tour operator Tui rose 2.2%.
Indivior topped the FTSE 250, rising 8.0%. The drugmaker posted a swing to annual profit and also unveiled plans to pursue a US listing.
Revenue in 2021 increased 22% to USD791 million from USD647 million. Indivior posted a pretax profit of USD190 million, swinging from a USD173 million loss in 2020. Indivior expects revenue of between USD840 million and USD900 million in 2022.
"With over USD1 billion in cash on our balance sheet, we have the financial strength and flexibility to pursue a balanced capital allocation strategy. Our primary focus remains on reinvesting in the business, but we also have the potential for additive inorganic growth opportunities and consideration of other value enhancement options," Chief Executive Mark Crossley said.
He added: "Together with the board, we have been assessing the optimal listing structure for Indivior's shares. Our preliminary view is that an additional US listing is likely to be beneficial to the group's profile and visibility, as approximately 80% of the group's net revenue is generated in the US. We are aware that this is an important topic, and the board and management intend to consult extensively with shareholders before concluding on any future path."
Indivior is based in the southern US state of Virginia.
Franchise Brands was down 5.1%, valuing the company at GBP134.2 million, while fellow AIM listing Filta Group dropped 2.2%, implying a market value of GBP45.2 million.
Franchise Brands has agreed to acquire Filta in an all-share deal that was worth GBP49.2 million at Tuesday's closing price.
Franchise Brands is based in Manchester and owns brands such as ChipsAway, Willow Pumps and Metro Rod.
Filta is based in Rugby, England and provides cooking oil filtration and fryer management services.
"The Filta board believes that there are a number of opportunities to grow and diversify its business and that, whilst Filta has a powerful and successful franchise formula in North America, it has found it more challenging to grow its franchise network in the UK, a major market. The offer provides an opportunity for Filta to become part of a more diversified group, with greater scale, highly complementary services, and a strong balance sheet, offering Filta enhanced growth potential," a joint statement read.
Some Filta directors, as well as connected parties, who hold a total of a 62% stake in the company backed the deal. Franchise Brands has also received the support of Gresham House Asset Management, which holds just shy of a 20% stake.
Brent oil was quoted at USD94.44 a barrel early Wednesday, up from USD92.50 a barrel at the equities close on Tuesday. Gold stood at USD1,856.58 an ounce, up from USD1,848.09.
By Eric Cunha; [email protected]
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