LONDON MARKET MIDDAY: European stocks up but FTSE advances cautiously

(Alliance News) - London's FTSE 100 eked minor gains on Wednesday morning, though European peers made more confident strides, despite economic data showing the Omicron variant has weighed on eurozone growth and as traders awaited a key US central bank update.

Ahead of the market open in New York, focus will be on tech stocks as rising US Treasury yields and valuation worries hit the sector on Tuesday.

The FTSE 100 index was up 14.50 points, or 0.2%, at 7,519.65 midday Wednesday. This built a little on a confident start to 2022 for London's flagship index, which added 120 points on Tuesday.

The mid-cap FTSE 250 index was down just 1.62 points at 23,895.03. The AIM All-Share index was down 0.64 of a point, or 0.1%, at 1,212.21.

The Cboe UK 100 index was up 0.3% at 745.89. The Cboe 250 was up 0.1% at 21,271.88, and the Cboe Small Companies up 0.2% at 15,565.49.

The CAC 40 in Paris was up 0.5% and the DAX 40 in Frankfurt advanced 0.6%.

The FTSE 100 hit a high of 7,527.28 points on Wednesday, its best level for nearly two-years. Though Wednesday's gains were a lot more cautious than Tuesday's rally, the FTSE's strong start to the year has continued.

"Overall, risk appetite remains positive, with investors choosing to move into stocks that are sensitive to economic growth and those that are relatively less expensive or have higher dividend yields," ThinkMarkets analyst Fawad Razaqzada commented.

"The biggest driver behind this is relief that Omicron is not as deadly as Delta, which is fuelling expectations that travel restrictions and lockdowns will be lifted soon. Omicron's rapid spread means cases will likely peak very soon in Europe and given that it doesn't cause too many people severe illnesses to require hospitalisation, it is boosting the prospects of herd immunity."

The dollar was weaker on Wednesday, though a volatile day for the pound meant the UK currency was unable to capitalise.

The pound fetched USD1.3546 midday Wednesday, marginally higher than USD1.3542 at the London equity market close on Tuesday but below an intraday high of USD1.3553.

The euro stood at USD1.1321, up from USD1.1303. Against the yen, the dollar was trading at JPY115.65, dropping from JPY116.03.

The euro was on the up despite data showing growth in the eurozone's private sector faded to a nine-month low in December, as rising Covid-19 infections held back the single currency bloc's economic progress at the end of the year.

The IHS Markit composite purchasing managers' index fell to 53.3 points in December from 55.4 points in November. Though still above the 50.0 no-change mark, December's figure suggests growth has slowed.

"In one line: Expect further falls in the PMI," analysts at Pantheon Macroeconomics summarised.

"Looking ahead, we expect this survey to fall throughout Q1, as most of the recent virus restrictions were imposed at the very end of Q4."

Still to come on Wednesday's economic calendar is a US services PMI reading at 1445 GMT. Before that is the latest ADP jobs report at 1315 GMT. The latest Federal Reserve minutes are posted at 1900 GMT.

"[Market participants] will also scrutinize the text to see if they can discern any hints, suggestions, indications, or adumbrations as to the timing of the subsequent moves that will sooner or later follow the end of tapering, namely 'lift-off' (the first rate rise) and then the shrinking of their balance sheet as they stop reinvesting maturing bonds," BDSwiss analyst Marshall Gittler commented.

After the most recent Fed meeting, the central bank said it was on track to end its pandemic-era bond purchases by March.

Ahead of the New York stock market open, the Dow Jones Industrial Average was called flat, the S&P 500 down 0.1% and the tech-heavy Nasdaq Composite down 0.4%.

Tuesday's session was characterised by a shift to cyclical stocks - those that would benefit from a reopening of the economy - from pandemic winners such as the tech sector. This benefited the Dow, but hurt the Nasdaq.

"The selling of shares in the technology sector has provided us with the first glimpse of taper tantrum this year," ThinkMarkets analyst Razaqzada added.

It was a similar picture on the London Stock Exchange on Wednesday, with travel and leisure stocks again on the up.

InterContinental Hotels Group, the owner of the Holiday Inn and Crowne Plaza brands, rose 2.8%. UBS lifted the stock to Buy from Neutral. Cineworld was 13% higher, the best performing mid-cap stock.

Online grocer Ocado, which has found profit hard to come by in recent years and has a burgeoning technology arm of its own, slightly bucked the trend on Wednesday, surging 5.3%. Berenberg lifted the stock to Buy from Hold.

Ocado also stood out positively in the latest Kantar survey of the UK grocery market. Joint-venture partner Marks & Spencer was up 4.0%.

Elsewhere in London, ad agency M&C Saatchi leapt 15% on Wednesday after a London-listed acquisition company confirmed it had bought a 9.8% stake.

AdvancedAdvT a London Main Market-listed acquisition vehicle, said it bought 12.0 million M&C Saatchi shares for GBP2.00 each, making the total value of the deal GBP24.0 million.

AdvancedAdvT said it viewed the acquisition of the shareholding in the London-based advertising agency as a "good investment opportunity".

Gold prices increased on Wednesday, with the precious metal benefiting from its inverse relationship with the dollar.

ActivTrades analyst Ricardo Evangelista commented: "However, the precious metal's scope for further gains is limited by the strength of the US dollar, due to the inverted correlation between the two assets. The publication later today of the minutes for last month's FOMC meeting is likely to provide more clues over the timing of the American central bank rate hikes and influence the performance of the greenback, which to a large extent remains the main driver behind gold’s price action."

An ounce of gold was trading at USD1,820.13 midday Wednesday, up from USD1,814.05 late Tuesday. Brent oil was quoted at USD79.92 a barrel, down from USD80.27.

By Eric Cunha; ericcunha@alliancenews.com

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