Cautious trade as focus turns to rate decisions

(Alliance News) - Stock prices in London were mostly lower at midday on Wednesday, though large-cap indices eked out a gain, as investors looked ahead to a busy two weeks for central bank rate decisions.

"Financial markets appear to be taking a breather this week. We are in this period now where the [US] debt ceiling drama has come and gone, and the [Federal Open Market Committee] meeting is not until next week, so markets are just going through the motions in the absence of any major drivers of sentiment," said Tim Waterer, chief market analyst at KCM Trade.

The Fed will announce its next interest rate decision on Wednesday next week. The day after, the European Central Bank will announce its own decision. The Bank of England will follow a week later.

Before then, the Bank of Canada is set to announce its interest rate decision at 1500 BST on Wednesday. The decision will follow on a surprise 25 basis point rate rise from the Reserve Bank of Australia on Tuesday.

The FTSE 100 index was up 9.22 points, or 0.1%, at 7,637.32. The FTSE 250 was down 31.55 points, or 0.2%, at 19,185.67. The AIM All-Share was down just 0.31 of a point at 792.26.

The Cboe UK 100 was up 0.1% at 761.97, the Cboe UK 250 was down 0.1% at 16,748.16, and the Cboe Small Companies was down 0.1% at 13,349.54.

In European equities on Wednesday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both down 0.1%.

In London, housebuilders were among the worst performing stocks in the FTSE 100 at midday.

Persimmon was down 1.4%, Taylor Wimpey down 1.2%, Berkeley down 1.2% and Barratt Developments down 1.1%.

The stocks came under pressure after data from Halifax showed UK house prices saw their first annual decline in over a decade in May.

According to the mortgage lender, average UK house prices were flat in May from April, after declining by 0.4% in April from March.

On an annual basis, however, prices fell 1.0% in May, after edging up 0.1% in April. This marked the first annual decline in house prices since December 2021, when they fell 0.1%.

Russ Mould, investment director at AJ Bell, said that the news shouldn't be a "shock", given the pressures on the UK property market from soaring mortgage costs and weak consumer sentiment, but he added it was nevertheless a "jolt" to see a decline in the market "in black and white".

Associated British Foods was the top blue-chip performer at midday, up 3.9%.

On Tuesday, the food producer and retailer said it struck a GBP48 million deal to acquire Aquis Stock Exchange-listed National Milk Records, strengthening its agriculture arm.

Shares in National Milk Records were untraded at 206.0 pence, below the offer price of 215.00p.

In the FTSE 250, discoverIE jumped 8.0%, making it the index's best performer at midday, as it reported an increase in annual profit and revenue and maintained an optimistic outlook in the face of inflation pressure.

The customised electronics maker posted a pretax profit of GBP29.1 million in the financial year that ended March 31, up 70% from the previous year's GBP17.1 million. Revenue climbed 18% to GBP448.9 million from GBP379.2 million in the prior year.

Looking forward, discoverIE said its order book remained at a higher than expected level, providing visibility of strong demand.

Elsewhere in London, 888 soared 25% after it received backing from an investment vehicle that includes several former board members of Ladbrokes and Coral owner, Entain.

According to a regulatory filing issued on Tuesday, FS Gaming Investments has built a 6.6% stake in 888.

FS Investments is backed by Kenny Alexander, Lee Feldman and Shay Segev. Alexander was formerly chief executive of GVC, now known as Entain.

Analysts at Jefferies said the names are a "blast from gaming past" and added it read the investment as a "positive endorsement" of the 888/William Hill integration opportunity.

On AIM, IOG plunged 42% after the UK-focused developer and producer of offshore gas reported a constrained maximum gas rate at the Blythe H2 well in the North Sea.

In addition, IOG noted its balance sheet is under pressure from the recent pull-back in natural gas prices. IOG said it will attempt "to secure pre-emptive waivers of potential covenant breaches" and agree measures to allow it to weather the period of weaker gas prices.

Stocks in New York were called mostly, but very marginally, lower on Wednesday. The Dow Jones Industrial Average was pointed down 0.1%, the S&P 500 index flat, and the Nasdaq Composite a few points lower.

"With the [US Federal Reserve] in the blackout period and [US consumer price index inflation data] looming, both of which are getting framed with a touch of policy uncertainty ringing in the background, investors appear to have moved into wait-and-watch mode," said Stephen Innes, managing partner at SPI Asset Management.

The dollar was weaker midday Wednesday. The pound was quoted at USD1.2457, higher compared to USD1.2411 at the close on Tuesday. The euro stood at USD1.0710, higher against USD1.0687. Against the yen, the dollar was trading at JPY139.33, lower compared to JPY139.77.

Luca Santos, currency analyst at ACY Securities said the dollar is "struggling to find meaningful short-term direction" with the upcoming Federal Open Market Committee meeting approaching.

"Since Federal Reserve speakers are currently restricted from making public statements, and there are no major US economic indicators to analyse today, the foreign exchange markets might remain relatively stagnant until there is a clearer indication of the prevailing interest rate differentials or overall market sentiment," he explained.

Brent oil was quoted at USD76.99 a barrel at midday in London on Wednesday, up from USD76.40 late Tuesday. Gold was quoted at USD1,963.58 an ounce, higher against USD1,959.55.

By Heather Rydings, Alliance News senior economics reporter

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