(Alliance News) - Stocks in London were unable to make further inroads on Wednesday, during a day marked by mixed US data and a sobering UK economic forecast from Chancellor Rishi Sunak.
On the London Stock Exchange, a host of M&A activity added a bit of impetus to what was largely a subdued day of trading as investors eyed the raft of US data prints ahead Thursday's Thanksgiving holiday.
"After yesterday's gains today has a more muted feel to it, although with Thanksgiving just a short time away we were unlikely to see much volatility as US traders look to get through the day without any major upsets," IG Markets Chief Market Analyst Chris Beauchamp said.
The FTSE 100 index lost 0.6%, or 41.08 points to close at 6,391.09. The FTSE 250 gave back 1.1%, or 220.17 points, at 19,569.39 but the AIM All-Share closed flat at 1,032.03.
The Cboe UK 100 index closed down 0.6%, or 3.55 points, at 636.05. The Cboe 250 ended down 1.4% at 16,936.25, and the Cboe Small Companies lost 0.2% at 11,510.47.
In Paris the CAC 40 ended up 0.3%, while the DAX 30 in Frankfurt ended largely flat.
In the US, stocks were mixed at the time of the European close on Wednesday. The Dow Jones Industrial Average and S&P 500, both fresh from record closing highs with the DJIA topping 30,000 for the first time, were 0.6% and 0.3% lower, respectively. The Nasdaq Composite was 0.2% higher.
"Without anything fresh the latch onto the Dow Jones was always going to find it tough to stay above 30,000. Perhaps conscious of the fact that its recent gains are predicated on 2021 hopes – Biden taking over as president and a vaccine rollout – while the pandemic continues to rage across America right here in 2020, the Dow Jones pulled back after the bell," Spreadex analyst Connor Campbell said.
"This meant the European indices were unable to reverse their own reversal."
In the US, weekly jobless claims rose unexpectedly, data showed on Wednesday, while the third-quarter economic growth rate was confirmed at more than 33%.
Initial jobless claims for the week to November 21 came in at 778,000, up from 748,000 the week before, the Department of Labor reported. This confounded expectations, according FXStreet, of a decrease to 730,000.
Continuing claims for the week to November 13 fell to 6.1 million from 6.4 million the week before that. This again disappointed forecasts, with analysts having foreseen a fall to 6.0 million.
A recent rise in weekly initial jobless claims has coincided with an uptick in coronavirus infections in the US.
Separately on Wednesday, the Bureau of Economic Analysis's second estimate of third quarter US GDP confirmed an annualised growth rate of 33.1%. This followed a 31.4% slide in the second quarter.
Despite the dramatic rebound, US economy remains smaller than it was in 2019 before the Covid-19 health crisis.
US markets are closed for the Thanksgiving holiday on Thursday before re-opening for an abbreviated session on Friday.
"It'll be curious to see how Europe performs tomorrow, without the US markets – off for Thanksgiving – to guide them. It could see Brexit muscle its way to the top of the agenda, as the pound nervously awaits signs that a deal will be done before next Tuesday's 'deadline'," Spreadex's Campbell added.
European Commission President Ursula von der Leyen told EU lawmakers on Wednesday that despite the "genuine progress" on several important issues in post-Brexit trade talks with London, she "cannot tell you today if there will in the end there be a deal".
"There are still three issues that can make the difference between a deal and no-deal," she added: the extent of British compliance with EU social and environmental standards, how to govern disputes and fisheries.
The pound was quoted at USD1.3382 at the London equities close on Wednesday, up from USD1.3357 on Tuesday.
UK Chancellor Rishi Sunak on Wednesday said the government was providing GBP280 billion this year to help the country get through the coronavirus crisis, as the budget watchdog forecast a sharp economic contraction for 2020.
The devastation caused by coronavirus will see the UK economy shrink by its largest amount for 300 years and government borrowing reach levels previously unseen in peacetime.
The Office for Budget Responsibility has forecast that the UK economy will contract by 11.3% this year.
In 2021, the economy should rebound 5.5%, and grow an even-stronger 6.6% in 2022. In 2023, the bounce-back is expected to ease to 2.3%.
"Even with growth returning, our economic output is not expected to return to pre-crisis levels until the fourth quarter of 2022," said Sunak, warning that the economic damage is likely to be "lasting".
He added: "Long-term scarring means, in 2025, the economy will be around 3% smaller than expected in the March budget."
The chancellor said he "cannot justify a significant, across-the-board" pay increase for all public sector workers given the difficulties faced in the private sector.
Over a million nurses, doctors and others working in the NHS will get a rise but increases for the rest of the public sector will be "paused" – except for 2.1 million workers earning below the median wage of GBP24,000, who will receive at least GBP250 extra.
"What was a little surprising given the scale of today's spending commitments was the lack of detail about additional support for businesses over the course of the next few months, so that they are able to cope with the tighter restrictions which are likely to be in place until next March," CMC Markets analyst Michael Hewson said.
The euro stood at USD1.1909 at the European market close on Wednesday, up from USD1.1882 at the same time on Tuesday. Against the Japanese yen, the dollar was trading at JPY104.38, down from JPY104.62.
On the London Stock Exchange, there was a string of M&A news, with both GoCo and AA accepting takeover offers.
FTSE 250-listed media firm Future unveiled a GBP594 million takeover of price comparison site GoCo Group.
Under the agreed combination, GoCo shareholders will be entitled to receive 0.052497 new shares in magazine publisher Future and 33 pence in cash, valuing each GoCo share at 136p each.
GoCo - which owns Gocompare.com, Look After My Bills and MyVoucherCodes - saw its shares leap 5.8% to close at 116.40p on Wednesday. Future shed 2.9%.
"Given the attractions it's not a surprise that someone's come knocking for the group, especially given the recent flurry of M&A activity in the UK. The premium looks reasonable to us too. However, the fact it's Future that's got the chequebook out is rather baffling," Hargreaves Lansdown Equity Analyst Nicholas Hyett said.
"The deal is clearly a positive for GoCo shareholders, at least in the short term, but what it offers Future investors is less clear."
Elsewhere, AA rose 6.6% after agreeing to a firm takeover offer from a consortium of TowerBrook funds and Warburg Pincus funds, valuing the roadside rescue company at GBP219 million.
The consortium made a 35p cash approach and had until 1700 GMT on Tuesday to either announce a firm intention to make an offer, or walk away. AA then secured an extension, giving the consortium until 1700 GMT on Wednesday to make a firm offer.
AA shares closed at 33.90p on Wednesday.
AIM-listed video game services provider Keywords Studios also went shopping, spending USD32 million to buy g-Net Media, a Los Angeles, California-based provider of marketing services to the gaming and entertainment industries.
Keywords shares added 2.0% on Wednesday.
Back on the Main Market, Elementis rose 3.4% after the specialty chemicals firm rejected another takeover tilt by diversified resources firm Mineral Technologies.
The company confirmed that on Tuesday Mineral Technologies had handed Elementis a revised cash offer of 117 pence per share a 9% increase from 107p first proposed in mid-November. With 580.8 million shares in issue, the deal values Elementis at GBP679.5 million.
Brent oil fetched USD48.04 at the London equities close, higher versus USD47.68 at the same time on Tuesday.
The price of an ounce of gold rose to USD1,1811.61, up from USD1,805.23.
A quieter day on the economic calendar on Thursday sees the GfK consumer climate survey from Germany released at 0700 GMT.
While in the local corporate calendar, pub operators Fuller, Smith & Turner and Mitchells & Butlers release interim and annual results respectively. Retailer Ted Baker and guarantor loans provider Amigo Holdings also post half-year results.
Also on Thursday, consumer goods firm Imperial Brands, utility National Grid and commercial property developer Land Securities are among a host of stocks that will go ex-dividend, meaning new buyers no longer qualify for the latest payout.
By Eric Cunha; ericcunha@alliancenews.com
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