Babcock Share News (BAB)

(Alliance News) - Stocks in London got off to a cautious start on Wednesday ahead of the US Federal Reserve's latest interest rate decision.

"Investors are hesitant to place any bigger bets ahead of the most important event of the day - the Fed meeting. We are likely to see higher volatility in the dollar index, gold, and the US stock market," said Naeem Aslam, chief market analyst at AvaTrade.

The Fed's interest rate decision is due at 1900 GMT and will be followed by a press conference with Chair Jerome Powell at 1930 GMT.

Aslam said: "Even though there are fears that the US economy may be heading towards a double-dip recession, traders are not expecting anything new from the Fed today as the interest rates are already sitting near their ultra-low level."

London stock indices were mixed. The FTSE 100 index was 2.40 points lower at 6,651.61 early Wednesday. The mid-cap FTSE 250 index was up 22.96 points, or 0.1%, at 20,471.32. The AIM All-Share index was up 0.2% at 1,200.38.

The Cboe UK 100 index was down 0.1% at 661.85. The Cboe 250 was up 0.2% at 17,808.88, and the Cboe Small Companies flat at 12,207.27.

It was a similarly mixed picture in mainland Europe. The CAC 40 index in Paris was up 0.2% while the DAX 30 in Frankfurt was down 0.3% early Wednesday.

The dollar was mostly higher ahead of the Fed meeting.

The euro traded at USD1.2146 early Wednesday, soft on USD1.2162 late Tuesday. Against the yen, the dollar was quoted at JPY103.72 versus JPY103.65.

Sterling was quoted at USD1.3740 early Wednesday, a touch higher than USD1.3737 at the London equities close on Tuesday.

In another day of grim milestones, Britain surged past 100,000 Covid-19 deaths on Tuesday, and other European nations looked to tighten their borders, hoping to keep out new, more transmissible virus strains.

UK Prime Minister Boris Johnson said it was "hard to compute" the loss felt by British families after his country became the first European country to surpass 100,000 Covid-19 deaths.

According to the The Times, the UK government will announce Wednesday that British travellers must quarantine in hotels near airports for 10 days after returning from 30 high-risk countries, mostly in South America and southern Africa.

In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.3%. In China, the Shanghai Composite closed up 0.1%, while the Hang Seng index in Hong Kong closed down 0.3%.

The S&P/ASX 200 in Sydney closed down 0.7% as it reopened from Tuesday's Australia Day holiday.

Gold was quoted at USD1,847.15 an ounce early Wednesday, lower than USD1,854.00 on Tuesday. Brent oil was trading at USD56.33 a barrel, up from USD55.87 late Tuesday.

Fresnillo was the worst performer in the FTSE 100 in early dealings, down 2.0%. The miner said fourth-quarter production was in line with expectations, with silver and gold output both falling on a year ago.

Quarterly attributable silver production was 13.0 million ounces, down 6.0% on a year ago and 2.5% lower than the third quarter of 2020. This was driven by a lower ore grade and volume of ore processed at the Saucito mine, mitigated by a higher ore grade at the San Julian disseminated ore body.

Quarterly attributable gold output was 215,600 ounces, down 7.8% on a year ago but up 25% on the third quarter of 2020.

"This followed a weaker 3Q20 due to Covid-19 operational restrictions earlier in the year which resulted in lower volumes of ore deposited at our open pits during 2Q20 and subsequently affected the recovery cycle at the leaching pads in 3Q20," Frensillo explained.

Full year attributable silver production was 53.1 million ounces, down 2.9% on 2019, while full-year gold production was down 12% at 769,600 ounces.

For the year ahead, Fresnillo expects silver production in the range of 53.5 million to 59.5 million ounces and gold output for 2021 around 675,000 to 725,000 ounces.

In the FTSE 250, Babcock shares slid 7.6% after Barclays slashed the defence firm to Underweight from Overweight. Towards the other end of the index was Greencore, shares up 4.4% and benefiting from a ratings upgrade with Jefferies moving the stock to Buy from Hold.

On AIM, Scapa shares surged 25% at 221.00 pence after receiving a GBP402.9 million takeover offer from performance materials company Schweitzer-Mauduit International.

Under the deal agreed between AMS Holdco 2 - a wholly-owned subsidiary of Schweitzer-Mauduit - and healthcare and industrial firm Scapa, shareholders will receive 210p in cash for each Scapa share held. This represents a 19% premium to Tuesday's closing price of 177p.

"We believe the combination of our complementary businesses will bring benefits to all stakeholders. We see these not only resulting from increased scale, but also from an increased ability to cross-sell products across our respective client bases, as well as an increased potential to enhance inorganic growth from within a larger group," said Scapa Chief Executive Heejae Chae.

The economic events calendar on Wednesday has US durable goods orders at 1330 GMT. The World Economic Forum's Davos Agenda continues.

By Lucy Heming; lucyheming@alliancenews.com

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