(Alliance News) - London stocks got off to a mixed start on Wednesday as US Federal Reserve Chair Jerome Powell failed to fully quell worries about runaway inflation and resulting rate hikes.
"The major US indices erased earlier losses and the long-maturity Treasury yields reached a delightful moment of release after the Federal Reserve Chair Jerome Powell told the US policymakers that the monetary policy will remain unchanged until substantial progress is made in the US jobs market, and more importantly turned a blind eye on the rising inflationary pressures," said Ipek Ozkardeskaya, senior analyst at Swissquote.
"That should've been music in investors' ears, but this time, the market questions what if the iceberg is too close," said Ozkardeskaya. "In fact, avoiding the inflation talk won't necessarily solve the problem. If nothing, the rising energy and commodity prices and softening US dollar can only translate into higher consumer prices."
Powell's testimony continues on Wednesday.
The FTSE 100 index was down 30.28 points, or 0.5%, at 6,595.66 early Wednesday. The mid-cap FTSE 250 index was up 38.17 points, or 0.2%, at 21,095.89. The AIM All-Share index was up 0.4% at 1,188.29.
The Cboe UK 100 index was down 0.4% at 656.62. The Cboe 250 was up 0.3% at 18,774.37, and the Cboe Small Companies up 0.2% at 12,958.73.
A surging pound held back the FTSE 100's dollar earners on Wednesday. Sterling was quoted at USD1.4178 in the morning, higher than USD1.4103 at the London equities close on Tuesday and having crossed the USD1.42 mark briefly overnight.
Highly international stocks such as Experian and British American Tobacco fell 1.8% and 1.4%, respectively.
The euro, meanwhile, firmed a touch after some upwards revisions to German GDP growth.
Gross domestic product rose by 0.3% quarter-on-quarter in the final three months of 2020. This latest reading beat the initial estimate, released in January, of just 0.1% growth.
After slumping a historic 9.7% in the second quarter of 2020, the German economy recovered in the third quarter to post 8.5% growth. However, a resurgence in coronavirus infections and subsequent restrictions imposed saw the rebound slow sharply towards the end of the year.
For 2020 as a whole, the economy contracted 4.9%. This, again, was improved from January's reading of a 5.0% decline in 2020.
The euro traded at USD1.2165 early Wednesday, firming on USD1.2160 late Tuesday.
In mainland Europe, the CAC 40 in Paris was up 0.1% while the DAX 30 in Frankfurt rose 0.4% early Wednesday.
In Asia, the Japanese Nikkei 225 index closed down 1.6%. Against the yen, the dollar rose to JPY105.62 from JPY105.11 at the London equities close on Tuesday.
HSBC was the worst performer in the FTSE 100 on Wednesday, down 2.9% as the dual-listed lender tracked losses in Hong Kong, where the Hang Seng index ended down 3.0%.
Hong Kong tanked after hiking stamp duty on stock trades for the first time in almost three decades on Wednesday, as it tries to plug a pandemic-induced record budget deficit.
The business-friendly financial hub, which prides itself on low taxes and no capital gains tax, has been battered for two years by long-running political unrest and then the coronavirus, putting a huge strain on government coffers. In a bid to shore up finances, finance chief Paul Chan said he would lift the levy on share transactions to 0.13% from 0.1%, the first increase since 1993.
In mainland China, the Shanghai Composite index closed down 2.0%.
Standard Chartered, also dual-listed in Hong Kong, was down 1.8% in London. In addition, the emerging markets-focused lender was cut to Hold from Buy by Investec. StanChart will release its 2020 earnings on Thursday.
In the green in London early Wednesday was Reckitt Benckiser, rising 2.5% as it swung to profit for 2020 on a boost for its disinfectant brands due to the pandemic.
Net revenue for 2020 increased 8.9% to GBP13.99 billion from GBP12.85 billion the year before, with the firm swinging to a pretax profit of GBP1.87 billion from a loss of GBP2.11 billion in 2019. In 2019, Reckitt took impairments totalling GBP5.12 billion, which reduced to just GBP985 million in 2020.
Like-for-like net revenue growth was 12%, with the company noting the "very strong, volume-led growth in a Covid environment". Reckitt said it saw "sustained" strong demand for disinfectant product Dettol throughout the year.
"Our category-leading germ protection/disinfection brands have all seen substantial market growth, with around 80% of our consumers expecting to retain many of their new improved habits post pandemic. We capitalised on these new behaviours with Dettol and Lysol entering 41 markets, with plans to enter a further 29 markets in 2021," said Chief Executive Laxman Narasimhan.
Narasimhan described 2020 as a "turning point" for the company, expecting further strategic progress in the year ahead.
Separately, Reckitt said it has agreed to sell its Scholl brand and will be buying the Biofreeze brand.
Gold was quoted at USD1,806.73 an ounce early Wednesday, higher than USD1,803.05 on Tuesday. Brent oil was firmed a touch to USD65.33 from USD65.07.
By Lucy Heming; lucyheming@alliancenews.com
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