Stocks down before Fed minutes and US PMI data

(Alliance News) - Stock prices in London were down at midday on Wednesday, in cautious trade ahead of key US data and central bank minutes in the afternoon.

The latest Institute of Supply Management's manufacturing purchasing managers' index is released at 1500 GMT, before minutes from the Federal Reserve's latest meeting at 1900 GMT.

The FTSE 100 index was down 69.86 points, or 0.9%, at 7,651.66. The FTSE 250 was down 174.90 points, 0.9%, at 19,336.90, and the AIM All-Share was down 5.84 points, 0.8%, at 755.71.

The Cboe UK 100 was down 0.8% at 764.47, the Cboe UK 250 was down 1.0% at 16799.17, while the Cboe Small Companies was up 0.2% at 14,985.16.

In European equities, the CAC 40 in Paris slumped 1.3%, while the DAX 40 in Frankfurt was down 0.8%.

"The FTSE 100 marked its 40th birthday with a celebration more akin to a quiet pint in an empty pub than anything more befitting of a major landmark," said AJ Bell analyst Russ Mould.

"The index was flat after mixed trading in the US overnight, where tech stocks came under pressure. The so-called 'magnificent seven' accounted for a big chunk of the gains achieved by global stocks in 2023 and much will rest on their performance again in 2024."

The magnificent seven stocks refer to technology firms Amazon, Apple, Google parent Alphabet, Facebook owner Meta Platforms, Microsoft, Nvidia and Tesla.

Stocks in New York were called lower. The Dow Jones Industrial Average and the S&P 500 index were both called down 0.3%, while the Nasdaq Composite was called down 0.5%.

Sterling was quoted at USD1.2625 at midday on Wednesday, higher than USD1.2620 at the London equities close on Tuesday. The euro traded at USD1.0922, lower than USD1.0955. Against the yen, the dollar was quoted at JPY142.78, higher than JPY141.74.

"The dollar is getting more traction ahead of the FOMC minutes," Brown Brothers Harriman analysts commented.

"Last month's dovish Fed decision was a game changer for the dollar, but we believe markets are coming to realize that the US economy remains robust in Q4 and likely to remain so in 2024, which certainly wouldn't require six rate cuts from the Fed this year. That said, a sustained dollar recovery will really come down to the US data. Over the past few weeks, the readings have all come in quite firm and so we continue to believe that the current market easing expectations are dead wrong. Until these expectations shift, however, the dollar is likely to remain vulnerable."

In London, Tesco rose 1.3% and Sainsbury's added 1.0%.

The UK grocery sector had its busiest festive period since the onset of the Covid-19 pandemic four years ago, numbers from Kantar showed, while price inflation worries for consumers abated.

Kantar said grocery sales in the 12 weeks to December 24 rose 6.9% to GBP36.45 billion from GBP34.10 billion a year before. In the final four weeks of that period alone, sales totalled GBP13.7 billion.

Annual grocery price inflation in December eased to 6.7% from 9.1% in the four weeks to November 26. December's figure was the tamest level since April 2022, and Kantar said it was the sharpest monthly slowdown it has ever recorded.

"While inflation is coming down, prices are still rising on average albeit at a slower pace, meaning that customers are still having to spend more to obtain a similar number of items," said interactive investor analyst Victoria Scholar.

"The cost-of-living crisis has prompted shoppers to trade down to cheaper, unbranded products, a shift which has boosted sales of supermarkets' own-label lines."

Entain added 1.3%, after an activist investor joined the board. The sports betting and gambling operator appointed Ricky Sandler, founder of activist investor Eminence Capital to its board as a non-executive director.

Entain also agreed to appoint an additional non-executive director "mutually agreeable to Eminence and the company".

Sandler will be considered a non-independent non-executive director, and his three-year appointment is governed by a relationship agreement that limits Eminence to an 8% stake. Entain did not disclose Eminence's current holding, so it is less than 5%.

"After the departure of CEO Jette Nygaard-Andersen in December, the company needs to find some direction," said AJ Bell's Mould.

"At least last year's conclusion of a HMRC probe into a legacy business in Turkey provides the company with something of a clean slate from which to try and get earnings on an upwards trajectory."

GSK gained 1.4%, after Jefferies raised the pharmaceutical maker to 'buy' from 'hold', raising its price target to 1,900p from 1,550p.

In the FTSE 250, Wizz Air lost 3.3%, after the Budapest-based airline said it carried 5.0 million passengers in December, up 19% from 4.2 million the year prior. Capacity for the month was 22% higher at 6.0 million seats, compared to 4.9 million seats in December 2022.

Its load factor fell year-on-year, however, to 82.1% from 84.5%.

Ryanair, meanwhile, said it carried 12.5 million passengers in December, up 8.7% from 11.5 million in the corresponding month last year. Its load factor fell by one point to 91% from 92% the year before.

Ryanair added that it operated 72,500 flights in December, but noted that over 900 flights were cancelled due to the Israel-Gaza conflict.

Shares were down 4.0% in Dublin.

On AIM, C4X Discovery surged 50%, after the drug discovery company said it received a USD11.0 million milestone payment from FTSE 100-listed pharmaceutical firm AstraZeneca, following trials of the C4X respiratory disease therapy treatment.

The payment stems from preclinical progress of C4X's NRF2 Activator programme, an oral therapy for the treatment of inflammatory and respiratory diseases which AstraZeneca is developing following a agreement between the two in November.

In addition to a USD2.0 million upfront payment, the global licencing agreement for the NRF2 Activator entitles C4X to receive up to USD400.0 million in payments following preclinical, clinical development and commercial milestones. The deal also will grant C4X tiered mid-single digit royalties on future sales of the NRF2.

Intercede rose 18%, after it secured a "major" licence order worth USD1.0 million for a new, unnamed client in the US intelligence sector.

In addition to the perpetual licence order, the Lutterworth, England-based cybersecurity software firm said the client is also contracted for a separate annual subscription of USD200,000.

Intercede said this order, combined with the expected additional conversion of its existing pipeline in its fourth quarter, means that it now expects financial performance to be ahead of market expectations for the financial year ending March 31 and further underpins financial 2025.

Gold was quoted at USD2,051.09 an ounce at midday on Wednesday, lower than USD2,064.66 on Tuesday. Brent oil was trading at USD75.89 a barrel, lower than USD77.75.

By Greg Rosenvinge, Alliance News senior reporter

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