Stocks lower in cautious trade before Fed rate

(Alliance News) - Stock prices in London were lower at midday Wednesday, as investors eye two key interest rates from the US Federal Reserve and the Bank of England.

The Fed will announce its interest rate decision later this evening, followed by the BoE on Thursday.

The FTSE 100 index was down 8.98 points, 0.1%, at 7,312.74. The FTSE 250 was down 83.56 points, 0.5%, at 16,999.49, and the AIM All-Share was down 0.51 of a point, 0.1%, at 679.34.

The Cboe UK 100 was down slightly at 729.70 and the Cboe UK 250 was down 0.6% at 14,777.12. Meanwhile, the Cboe Small Companies was up 0.2% at 12,616.66.

Stocks in New York were called lower, as investors geared up for the Federal Reserve's interest rate decision on Wednesday. The Dow Jones Industrial Average and the S&P 500 index were both called down 0.3%, and the Nasdaq Composite down 0.4%.

The US Fed is widely anticipated to leave interest rates where they are at its November meeting, and will be hoping that the recent rise in bond yields will help to do some of the heavy lifting. The decision will be announced at 1800 GMT.

According to the CME FedWatch Tool, there is a 98% chance the central bank will leave the federal funds rate range unchanged at 5.25% to 5.50%. At its September meeting, the Fed left rates unchanged, as was widely expected, after hiking rates by a quarter percentage point in July.

With this in mind, SPI Asset Management's Stephen Innes said he expects the meeting to be a "snooze fest."

AJ Bell's Russ Mould commented: "The broad expectation is the Fed will sit on its hands for now, so all the focus is likely to be drawn to any hints dropped about the future direction of monetary policy.

"Given the volatile economic and geopolitical backdrop, Jerome Powell will have to weigh any words in the accompanying statement carefully if he wants to avoid giving investors the jitters."

Analysts at Lloyds noted that Powell is "unlikely to rule out a further hike or give much support to hopes of an early cut."

Lloyds added: "Instead, he will probably emphasise that the picture is too uncertain to look too far ahead."

Once the Fed's decision is out of the way, market attention will quickly shift to the Bank of England's own decision, which will be on Thursday.

Markets are also expecting the BoE to stand pat.

"Since the last meeting in September, indicators of economic activity have remained less than impressive, wage growth has eased and hawk Jon Cunliffe has left the committee, with his replacement, Sarah Breeden, appearing likely to side with the doves," said Ebury's Matthew Ryan.

"This would suggest no closer than a 6-3 vote in favour of no change. The BoE will probably strike a cautious tone on the growth outlook, and downward revisions to the GDP forecasts for 2023 and 2024 are on the cards."

Moving away from interest rate decisions, there was some bad news for the UK's manufacturing sector.

The S&P Global/CIPS manufacturing purchasing managers' index posted 44.8 points in October, edging up from 44.3 in September. However, the figure was worse than the previous flash estimate of 45.2.

The sub-50 reading indicates the sector remains in contraction, though at a marginally slower pace compared to the prior month.

"With another contraction in manufacturing activity, any sustained optimism about the next 12 months amongst manufacturing companies was likely to be as a result of hope over the evidence," considered John Glen, chief economist at the Chartered Institute of Procurement & Supply.

"That's because the UK economy remains in poor shape, and subsequently manufacturing production is experiencing its most sustained downturn since the recession of 2008/9."

In European equities on Wednesday, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was up 0.1%.

The pound was quoted at USD1.2130 at midday on Wednesday in London, up slightly compared to USD1.2128 at the equities close on Tuesday. The euro stood at USD1.0543, down against USD1.0562. Against the yen, the dollar was trading at JPY151.21, down compared to JPY151.63.

On the FTSE 100, Next rose 3.5%, after it raised its annual profit guidance to GBP885 million.

The Leicester, England-based clothing, footwear and home products' retailer had previously forecasted a pretax profit of GBP875 million for the financial year ending in January 2024. Pretax profit for financial 2023 was GBP870.4 million.

This comes after Next said sales in the three months ended October 28 grew 4.0% from a year ago, GBP23 million ahead of its guidance which was originally set to be an increase of 2.0%. This was mainly driven by sales growth in its Online division of 6.5%.

At the other end of the FTSE 100 were Segro down 2.7%, as Goldman Sachs cut the stock to 'sell'. BP fell 1.4%, as JPMorgan cut the stock to 'underweight' from 'neutral', after its third-quarter results missed profit estimates on Tuesday.

In the FTSE 250 index, Aston Martin was by far the worst performer at midday, falling 11%.

Executive Chair Laurence Stroll said: "We remain on track to substantially achieve our 2024-25 financial targets in 2024."

However, the Gaydon, England-based manufacturer lowered its guidance for 2023 vehicle production by about 4%.

On a more positive note, pretax loss narrowed to GBP117.6 million in the third quarter ended September 30 from GBP225.9 million a year before. Revenue rose by 15% to EUR362.1 million from GBP315.5 million, as wholesale volumes rose by 4.3% to 1,444 vehicles from 1,384.

Amongst London's small caps, Asos dropped 9.0%.

The London-based online fashion retailer said in the year ended September 3, pretax loss widened to GBP296.7 million from GBP31.9 million at August 31, 2022, as revenue fell 10% to GBP3.55 billion from GBP3.95 billion a year ago.

CEO Jose Antonio Ramos Calamonte said: "[Financial 2023] was a year of good progress for Asos in a very challenging environment, and I am proud of what the business has achieved."

HeiQ surged 33%, after the trading of its shares were restored.

On Monday, the London-based materials innovation and hygiene technology company posted its 2022 results, as well as its interim 2023 results.

Brent oil was quoted at USD86.38 a barrel at midday in London on Wednesday, up from USD86.09 late Tuesday. Gold was quoted at USD1,983.88 an ounce, down against USD1,989.19.

By Sophie Rose, Alliance News reporter

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