LONDON MARKET CLOSE: Stocks Flat As All Eyes Turn To Federal Reserve

LONDON (Alliance News) - Stocks in London ended tentatively lower on Wednesday as investors ...

Alliance News 13 June, 2018 | 5:20PM
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LONDON (Alliance News) - Stocks in London ended tentatively lower on Wednesday as investors await a highly anticipated interest rate hike from the US Federal Reserve.

The FTSE 100 index closed flat or 0.10 points lower at 7,703.71. The FTSE 250 ended flat or 8.77 points lower, at 21,232.87, and the AIM All-Share closed up 0.1%, or 0.84 points, at 1,101.67.

The Cboe UK 100 closed flat at 13,076.56, the Cboe UK 250 closed up 1.7% at 19,411.20, and the Cboe UK Small Companies closed down 0.1% at 12,919.52.

"Stocks have been edging lower ahead of the Federal Reserve meeting this evening. Dealers appear to be closing out their long positions in advance of the interest rate decision and press conference," said David Madden, market analyst at CMC Markets.

The US Federal Reserve's interest rate decision is at 1900 BST, to be followed by a press conference from Chairman Jerome Powell.

The Fed is widely expected to raise the benchmark rate by 25 basis points, to a range between to 1.75% to 2.0%.

"Today's Fed rate hike should be a non-event, something that will please both investors and the Federal Reserve, who will be happy that the market continues to absorb tighter monetary policy, treating it as routine. Arguably, a decision not to hike today would be more worrying, but there seems little reason to fear that outcome. What will be worth watching will be the dot plot and statement, the latter particularly in case the US central bank makes some guarded comment on trade wars," said IG chief market analyst Chris Beauchamp.

"It's going to be interesting to see how much investors react to whatever happens on Wednesday evening, given how well-signalled a rate hike has been. The response may well be down to the wording of the statement, ie how many more increases it suggests we are in for as the markets head into the second half of the year," said Spreadex analyst Connor Campbell.

On the London Stock Exchange, Glencore ended as the best blue chip performer up 3.8% after the miner and commodities trader reached a settlement with the Democratic Republic of the Congo's state mining company.

The Switzerland-headquartered firm said its subsidiary Katanga Mining has agreed with Gecamines a number of remedies which will see the latter drop all legal proceedings. Gecamine had been seeking either a wind-up of the Kamoto Copper Co joint venture, held 75% by Katanga and the rest by Gecamines, due to the partnership's capital issues.

To remedy this, Katanga and Gecamines have agreed USD5.60 billion out of Kamoto's USD9 billion debt will be converted into equity. Further, Kamoto will waive its entitlement to replacement reserves and incurred drilling costs on Gecamines' behalf, amounting to a total of USD342 million.

At the other emd of the large cap index, online takeaway platform Just Eat ended as the worst performer down 4.7% amid UK expansion plans by rival Deliveroo.

The Guardian newspaper reported late Tuesday that Deliveroo intends to sign up 5,000 more UK eateries.

Just Eat recently said it was planning to launch its own delivery fleet in the UK, Canada, Australia and New Zealand, competing with Deliveroo. Until now, Just Eat has relied on restaurants to make their own deliveries, whereas Deliveroo is know for its ubiquitous bicycle couriers.

Deliveroo fired back with its own UK expansion plans expecting to add 5,000 UK eateries to its network as well as employ "thousands" of more couriers to its existing team of 15,000 riders.

In addition, Deliveroo plans to offer restaurants with their own delivery the option of using Deliveroo's couriers at busy times. As such, Deliveroo's new service would enable users to choose from 50% more restaurants, The Guardian noted.

In the FTSE 250, Stobart Group was the standout performer as it closed up 11% after Irish carrier Ryanair Holdings said it will open a new base at London Southend Airport from April next year.

Ryanair inked a five-year deal with the midcap support services firm - which owns the airport in Essex, east of London. The contract can be extended to 10 years. Ryanair shares closed down 0.6%.

The airline plans to invest USD300 million into three aircraft based at London Southend Airport and introduce 13 new routes to eight European countries. Ryanair shares were up 0.3%.

TalkTalk Telecom Group closed up 5.1% after Merrill Lynch double upgraded the home phone and internet services provider to Buy from Underperform. Analysts at the US bank said TalkTalk's more simplified strategy under a new management team can drive future growth.

At the other end of the midcap index, Dixons Carphone closed down 3.7% after the mobile phone and electrical goods retailer admitted to a data breach of its payment processing systems in its Currys PC World and Dixons Travel stores.

The pound was firm quoted at USD1.3370 at the London equities close, compared to USD1.3354 at the close Tuesday as UK headline inflation remained at a one-year low in May.

Data from the Office for National Statistics showed that UK consumer price inflation held steady at 2.4%, the lowest since March 2017, and in line with expectations.

Month-on-month, consumer prices gained 0.4% in May, matching economists' expectations. Core inflation that excludes energy, food, alcoholic beverages and tobacco, also remained stable in May, at 2.1%.

Separate data showed that input price inflation accelerated more-than-expected to 9.2% in May from 5.6% a month ago. Prices were forecast to rise 7.6%.

At the same time, output price inflation climbed to 2.9% annually, as expected, from 2.5%. Month-on-month, prices registered a steady increase of 0.4%, while economists had forecast a 0.3% rise.

In Paris the CAC 40 ended flat, while the DAX 30 in Frankfurt ended up 0.4%.

The euro was slightly lower at USD1.1773 at the European equities close, against USD1.1783 late Tuesday, ahead of the European Central Bank's policy meeting in Riga, Latvia on Thursday.

Analysts expect to see the ECB begin to wind down its stimulus programme as inflation moves in line with the central bank's target.

"The ECB is expected to provide some verbal cues that it will taper in the fourth quarter with an eye toward stopping at year end. However, Draghi will likely be at pains to say that other elements of the extraordinary monetary policy will continue well past the end of the purchases. We continue to pencil in the first hike around the middle of next year," said analysts at Brown Brothers Harriman.

Stocks in New York were at higher the London equities close in the run up to Fed's rate decision.

The DJIA was up 0.2%, the S&P 500 index 0.1% and the Nasdaq Composite up 0.4%.

In US economic news, the Labor Department said producer prices increased by 0.5% in May after inching up by 0.1% in April. Economists had expected producer prices to rise by 0.3%.

Excluding food and energy prices, core producer prices rose by 0.3% in May after edging up by 0.2% in April. Core prices had been expected to show another 0.2% increase.

The report said the annual rate of producer price growth accelerated to 3.1% in May from 2.6% in April, reaching its highest level in over six years. The annual rate of growth in core producer prices also ticked up to 2.6% in May from 2.5% in the previous month.

Brent oil was flat quoted at USD76.50 a barrel at the London equities close from USD76.53 at the same time the prior day.

Gold was flat quoted at USD1,297.35 an ounce at the London equities close against USD1,298.62 late Tuesday.

The economic event calendar on Thursday there is China retail sales figures at 0300 BST, Germany and France inflation readings at 0700 BST and 0745 BST respectively. There are also UK and US retail sales data at 0930 BST and 1330 BST respectively.

The UK corporate calendar on Thursday there are full year results from engineering software developer AVEVA Group, which is set to merge with Schneider Electric, and from wine retailer Majestic Wine. There are also trading statements from personal care products maker PZ Cussons and digital fashion retailer N Brown Group.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Stobart Group Ltd 233.00 GBX -0.64 -
Glencore PLC 309.95 GBX -1.62
TalkTalk Telecom Group PLC 121.80 GBX 0.83 -
Ryanair Holdings PLC 11.64 EUR 0.78 -
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