(Alliance News) - Stock prices in London opened in the red on Wednesday, as concerns about interest rate hikes and a global economic slowdown damped risk appetite.
The FTSE 100 index opened down 12.98 points, 0.2%, at 7,615.12. The FTSE 250 was down 38.73 points, 0.2%, at 19,178.49, and the AIM All-Share was down 0.50 of a point at 792.07.
The Cboe UK 100 was down 0.2% at 759.85, the Cboe UK 250 was down 0.2% at 16,737.91, and the Cboe Small Companies was down 0.1% at 13,736.89.
In European equities, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was down 0.2%.
"There is a struggle to find a sense of direction on financial markets as investors mull what's ahead for interest rate policy, while fresh clouds hover over the global economic outlook," said Hargreaves' Lansdown's Susannah Streeter.
In Japan on Wednesday, the Nikkei 225 index closed down 1.8%. In China, the Shanghai Composite closed up 0.1%, while the Hang Seng index in Hong Kong was up 0.8%. In Australia, the S&P/ASX 200 closed down 0.2%.
Investors in Asia-Pacific were digesting the latest trade data from China, which pointed to a slowing of the global economy. However, the worse-than-expected slump in exports suggested economic stimulus from the Chinese government could be more likely.
China's exports fell in May for the first time since February, state media reported, breaking a two-month growth streak as a post-Covid rebound in the world's second-largest economy faded. Overseas shipments sank 7.5% on-year last month, a sharp drop from an increase of 8.5% in April, according to figures published by the official Xinhua news agency.
Imports fell 4.5% in May, according to Xinhua. Forecasts in a survey by Bloomberg showed economists expected exports to drop 1.8% and imports to shrink 8.0%.
Investors also had a new global economic forecast to consider.
The Organisation for Economic Co-operation & Development slightly raised its growth outlook for the world economy, but still predicted growth will slow.
The OECD cited easing inflation and the dropping of Covid restrictions in China for boosting its growth outlook. However, it warned the recovery faces a "long road", with interest rate hikes prompted by stubborn core inflation to weigh on growth prospects.
The Paris-based organisation forecast an economic expansion of 2.7%, improved from 2.6% in its previous report in March, with upgrades for the US, China and the eurozone. But it is still under the 3.3% growth recorded in 2022.
The update from the OECD echoes the World Bank's outlook on Tuesday. The Washington-based institution said it expects global growth to slow from 3.1% in 2022 to 2.1% in 2023, but raised its annual growth outlook from 1.7% in January.
Oil prices headed lower, amid the weak energy demand outlook. Brent fetched USD75.75 a barrel, lower than USD76.40 on Tuesday afternoon.
Gold was quoted at USD1,958.75 an ounce early Wednesday, little changed from USD1,959.55 on Tuesday.
Equities on Wall Street ended flat to higher on Tuesday, as US recession concerns prompted caution, with the Dow Jones Industrial Average flat, the S&P 500 up 0.2% and the Nasdaq Composite up 0.4%.
Trading remains cautious ahead of next week's two key market catalysts. The latest inflation print from the US is due on Tuesday, followed by the Federal Reserve's latest US interest rate announcement on Wednesday.
"Inflation is likely to have cooled once more in May, although core prices could remain higher than the Fed would like in its ongoing battle to strangle inflation," noted interactive investor's Richard Hunter.
The dollar was little changed against major currencies in early exchanges in Europe.
Sterling was quoted at USD1.2410 early Wednesday, flat from USD1.2411 at the London equities close on Tuesday. The euro traded at USD1.0676, lower than USD1.0696. Against the yen, the dollar was quoted at JPY139.20, marginally soft versus JPY139.27.
In the FTSE 100, Diageo announced that chief executive officer Ivan Menezes has died, following a brief illness.
Menezes was due to retire at the end of the month, with Chief Operating Officer Debra Crew leading the company from July. On Monday, the London-based brewer with brands such as Guinness and Baileys said it promoted Crew to the role of interim CEO, as Menezes underwent emergency surgery for medical conditions including a stomach ulcer.
Menenez joined Diageo at its creation in 1997 from the merger of brewer Guinness and distiller Grand Metropolitan. He became executive director and board member in July 2012 and served as CEO from July 2013.
Listed housebuilders succumbed to selling pressure, as Halifax data pointed to the first decline in UK house prices in over a decade.
According to the mortgage lender, average house prices were flat in May from the previous month, after 0.4% fall in April from March.
On an annual basis, prices fell 1.0% in May, after edging up 0.1% in April. According to Halifax's data, this marks the first annual decline in house prices since December 2021, when they fell 0.1%.
Persimmon was down 1.7%, Taylor Wimpey down 1.2% and Barratt Developments down 1.1%.
GSK edged into the red, down 0.4%, despite announcing that its vaccine Arexvy has become the first EU-backed vaccine against the respiratory syncytial virus for adults aged 60 and older.
Elsewhere, broker ratings were moving individual stocks. Croda International was down 2.6%, after Goldman Sachs cut the stock to 'neutral' from 'buy'. Melrose Industries added 1.6%, as Barclays lifted its target price by 28%, keeping its 'outperform' rating for the stock.
In a boost for London, WE Soda, confirmed its intention to float on the premium segment of the London Main Market. The firm is the world's largest natural soda ash producer. It is based in London with production facilities in Turkey.
Soda is ash an ingredient used for glass manufacturing, but also in solar photovoltaic glass, the production of lithium carbonate used in electric vehicle batteries, and silicates and other sodium chemicals.
The company, which also goes by the name Kew Soda, said the final offer price and the maximum number of shares to be sold in the initial public offering will be determined following a book-building process.
Last week, the Financial Times reported WE Soda's owner, Turkish industrialist Turgay Ciner, is targeting a valuation of around USD7.5 billion, which would be enough to be included in the FTSE 100. The newspaper cited people "familiar with the matter".
On Wednesday, WE Soda said it expects indirect net proceeds to the company of the IPO to be around USD800 million, with around USD500 million to be used to pay down debt, and USD300 million for general corporate purposes.
Among London mid-caps, discoverIE rose 3.3%.
The customised electronics manufacturer announced its annual results for the financial year that ended March 31. Revenue rose 18% to GBP448.9 million from GBP379.2 million, while pretax profit surged 70% to GBP29.1 million from GBP17.1 million. It raised its annual dividend to 11.45p from 10.80p, with a final dividend proposed at 7.9p per share.
The group is well-positioned for future growth, given its strong acquisition pipeline and robust balance sheet, said CEO Nick Jefferies, and the new financial year has started well, with continued organic sales growth.
Among London's small-caps, 888 Holdings jumped 18%. Late Tuesday, it revealed FS Gaming Investments has taken a 6.6% stake in the firm.
FS Gaming is an investment vehicle backed by former board directors of gambling group GVC, including its former CEO Kenny Alexander.
GVC became Entain back in 2020.
In the international economic calendar on Wednesday, the Bank of Canada will announce its next interest rate decision at 1500 BST.
By Elizabeth Winter, Alliance News senior markets reporter
Comments and questions to newsroom@alliancenews.com
Copyright 2023 Alliance News Ltd. All Rights Reserved.
