(Alliance News) - Stock prices in London were mostly higher at midday on Wednesday, while the pound was back near a 40-year low against the dollar, as the interest rate decision by the US Federal Reserve edged closer.
"There is really no question of whether the Federal Reserve will raise rates or not today. They're almost certainly going up. The key unknown is exactly how much the central bank will push up the cost of borrowing," said Russ Mould, investment director at AJ Bell.
The consensus is for a 0.75 percentage point hike in US interest rates, which would be the third hike of such scale in a row and would push rates to a 3.0% to 3.25% range, the highest since 2008.
"Rates could feasibly go even higher in the coming months, which spells trouble for both consumers and businesses as it could take a long time for high rates to bring inflation down to the Fed's 2% target rate," Mould continued.
The Federal Open Market Committee will announce its decision at 1800 GMT. This will be followed by a press conference with Fed Chair Jerome Powell at 1830 GMT.
The FTSE 100 index was up 51.34 points, or 0.7%, at 7,244.32 at midday on Wednesday. The mid-cap FTSE 250 index was up 89.35 points, or 0.5%, at 18,617.60. The AIM All-Share index was down just 0.42 of a point at 854.90.
The Cboe UK 100 index was up 0.8% at 723.79. The Cboe 250 was up 0.4% at 15,945.59, and the Cboe Small Companies up 0.8% at 12,686.64.
UK public sector borrowing fell year-on-year in August but remained above pre-pandemic levels, figures from the Office of National Statistics showed.
Public sector net borrowing, excluding public sector banks, was GBP11.8 billion in August. This was down GBP2.6 billion from the previous year.
However, August's borrowing remained GBP6.5 billion more than in August 2019, pre-pandemic, and was GBP5.8 billion more than the GBP6.0 billion forecast by the Office for Budget Responsibility.
The news comes ahead of UK Chancellor Kwasi Kwarteng's mini-budget on Friday. The Times reported that Kwarteng is planning to announce a cut in stamp duty in a further attempt to boost growth – although Downing Street refused to comment.
UK Prime Minister Liz Truss confirmed she will be reversing the national insurance hike and axing the planned increase to corporation tax,
Sterling was quoted at USD1.1344 midday Wednesday, down against USD1.1404 at the London equities close on Tuesday. The pound hit a four-decade low of USD1.1306 last week after poor UK retail sales data sent cable plunging.
In the FTSE 100, Aveva was up 2.4% at midday. The industrial software firm agreed to a takeover offer from majority owner Schneider Electric, under which the French energy management company will acquire the remaining stake it does not already own.
Schneider currently owns a 59% stake in Aveva and will acquire the remaining 41% stake at a price of 3,100 pence per share in cash, valuing Aveva's total equity at GBP9.48 billion, and implying an enterprise value of GBP10.15 billion.
JD Sports was down 1.3%. The sportswear retailer agreed terms for former executive chair and chief executive Peter Cowgill to depart from the business.
Cowgill will be paid his full salary, benefits and bonus up to May 25, when he had stepped down. The board also reached two arrangements with Cowgill which it said were "in the best interests of the business".
One arrangement is a set of restrictive covenants for a two-year period and the second is a consultancy agreement for an expected period of three years. Cowgill will be a paid a total of GBP5.5 million under the two deals.
In the FTSE 250, LXi REIT rose 2.3% as it confirmed that it is in talks with J Sainsbury to buy 18 grocery stores, on a sale and leaseback basis, for around GBP500 million.
LXi said that the stores, which are located in the south of England, represent a net initial yield of around 5.0% and will be let back to Sainsbury's Supermarkets.
Sainsbury shares were up 1.8% at midday.
Elsewhere in London, Ten Entertainment jumped 5.0% as it swung to a pretax profit of GBP21.0 million from a loss of GBP10.8 million in the six months ended June 30.
The bowling alley operator says it is "delighted" with the growth as last year it benefited significantly from exceptional sales due to UK 'staycations' and the initial pent-up demand from the release of Covid restrictions.
On AIM, LADBible-owner LBG Media dropped 22% as it swung to a pretax loss of GBP1.9 million in the first half of 2022 from a profit of GBP5.6 million the previous year. Net operating expenses surged by 53% to GBP26.6 million from GBP17.4 million, while revenue rose by just 7.8% to GBP24.8 million from GBP23.0 million.
Nonetheless, LBG said it expects the full year to be "broadly" in line with market expectations
In mainland Europe, the CAC 40 index in Paris was up just 0.1%, while the DAX 40 in Frankfurt was down 0.2%.
"Nerves are again on edge about energy security particularly for European nations, amid concerns about the liquidity situation of suppliers. The move by the German government to nationalise Uniper by buying Fortum's slice of the gas importer, highlights the worries of politicians about the precariousness of the market," explained Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
Electricity and gas supplier Uniper confirmed its nationalisation by the German federal government, a victim of the energy crisis that has followed Russia's invasion of Ukraine.
The Berlin government will first pick up a 93% stake in the Dusseldorf-based energy firm through a capital raise of EUR8 billion at an issue price of EUR1.70 per Uniper share, which will exclusively be signed by the government.
Germany will afterwards acquire all shares held in Uniper by Espoo, Finland-based shareholder Fortum, bringing the government's total shareholding to 99%.
The euro traded at USD0.9926, down from USD0.9989 late Tuesday. Against the yen, the dollar was quoted at JPY143.88, higher versus JPY143.75.
Brent oil was trading at USD92.93 a barrel, up from USD90.82 late Tuesday. Gold was quoted at USD1,675.99 an ounce, higher than USD1,664.71 on Tuesday.
By Heather Rydings; heatherrydings@alliancenews.com
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