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(Alliance News) - A rally on Wall Street set European markets up for a strong start on Wednesday, with equities charging head first into the US Federal Reserve's first interest rate hike since 2018.
While posting impressive gains in early trade, London's FTSE 100 was lagging other European bourses, as shares in Avast tumbled 10% after the UK competition regulator took aim at its takeover by US cybersecurity peer NortonLifeLock.
The FTSE 100 index was up 103.42 points, or 1.4%, at 7,279.12 early Wednesday. The mid-cap FTSE 250 index was up 400.98 points, or 2.0%, at 20,658.64. The AIM All-Share index was up 10.46 points, or 1.1%, at 998.16.
The Cboe UK 100 index was up 1.5% at 723.97. The Cboe 250 was up 1.9% at 18203.83, and the Cboe Small Companies up 0.4% at 14468.69.
In mainland Europe, the CAC 40 in Paris stormed ahead by 2.5% while the DAX 40 in Frankfurt surged 2.3%.
Leading the FTSE 100 higher was Scottish Mortgage Investment Trust, rallying 5.9% as the investor tracked a strong performance in New York overnight. The trust holds investments in US tech firms such as Tesla and Amazon, as well as Chinese tech stock Tencent, which jumped 23% in Hong Kong.
The Dow Jones Industrial Average ended up 1.8% on Tuesday and the S&P 500 up 2.1%. The tech-heavy Nasdaq Composite closed up 2.9%.
Stocks in New York ended near session highs, resisting intraday selling pressure, as markets took confidence from a producer price reading that was robust but not hotter than forecast. The US producer price index rose 10% on an annual basis in February, in line with expectations and matching January's figure.
Momentum continued through to Asia, giving the Hong Kong market some much-needed respite after a brutal week so far.
The Japanese Nikkei 225 index ended up 1.6%, and the S&P/ASX 200 in Sydney ended 1.1% higher. In China, the Shanghai Composite closed up 3.5%, while the Hang Seng index in Hong Kong shot up 9.1%.
Focus now shifts to Wednesday's US interest rate decision, with the Federal Reserve set to hike rates for the first time since 2018.
"All eyes are firmly focussed on the Federal Reserve meeting later today – the first in four years, where an interest rate hike is expected. Should this fail to materialise, further volatility across European and the UK market should be expected. It's also worth keeping in mind the Russian invasion of Ukraine means the frequency and extent of rate rises may not be as high as previously predicted," said Sophie Lund-Yates, an analyst at Hargreaves Lansdown.
The Fed announces its latest interest rate decision at 1800 GMT on Wednesday. The economic calendar also has US retail sales at 1230 GMT.
The dollar was mixed heading into the Fed decision. Sterling was quoted at USD1.3062 early Wednesday, firm on USD1.3049 at the London equities close on Tuesday.
The euro traded at USD1.0995 early Wednesday, up versus USD1.0957 late Tuesday. Against the yen, the dollar edged up to JPY118.35 versus JPY118.26.
Gold was quoted at USD1,915.46 an ounce early Wednesday, lower than USD1,926.06 on Tuesday. Brent oil was trading at USD103.10 a barrel, up from USD101.36 late Tuesday.
Back in London, Avast was dragging on the FTSE 100, tumbling 10%, after the UK competition regulator waded into its deal to be taken over by US cybersecurity peer NortonLifeLock, finding that the combination could reduce competition.
The Competition & Markets Authority noted that Avast and NortonLifeLock are "close competitors, with few other significant rivals". The regulator said NortonLifeLock and Avast now have five working days to submit proposals to address its concerns, or it will refer the merger to a in-depth phase 2 investigation.
Tempe, Arizona-based NortonLifeLock had agreed back in August to buy Prague-based Avast in a cash-and-shares deal worth USD8.6 billion at the time. UK antitrust clearance was the only remaining regulatory condition for the deal, which had been expected to close on April 4.
The US company said it does not intend to offer any phase 1 remedies but promised to "engage constructively" with the CMA. However, due to the impasse, the two companies said they now expect the acquisition to complete in "mid-to-late 2022".
At the bottom of the FTSE 250 was Centamin, down 6.9% after the Egyptian gold miner reported a drop in revenue and profit for 2021 in a year of "peak reset".
Revenue for 2021 fell 12% to GBP733.3 million and pretax profit halved to GBP153.6 million from GBP315.0 million.
"In December 2020, we announced our three-year reset plans and outlook, which framed 2021 as our peak reset year, meaning lower production and higher capital expenditure. Therefore, understandably, our financial results last year were not as strong as previous years but, importantly, our business is in a much stronger position as we invest in our long-term success," the company said.
Centamin produced 415,370 ounces of gold in 2021, down 8% on 2020, though it expects an improvement in the year ahead with 2022's guidance range sitting at 430,000 ounces to 460,000 ounces.
However, costs are set to also rise. All-in sustaining costs in 2022 are guided between USD1,275 to USD1,425 per ounce sold, reflecting inflationary pressures and a USD226 million comprehensive asset reset and growth investment programme. In 2021, all-in sustaining costs rose 19% to USD1,234.
IG Group fell 3.5% despite the online trading platform saying it expects full-year revenue will moderately exceed current market expectations.
The third quarter that ended February 28 was another one of revenue growth, it said, with net trading revenue up 13% to GBP257.2 million. This reflects an all-time high in the number of active clients at 292,200 versus 220,900 a year before.
On AIM, Fevertree was down 2.6%. The tonic water maker will pay a special dividend after a strong 2021, though it cautioned on inflationary pressures.
Revenue for 2021 rose 23% to GBP311.1 million from GBP252.1 million in 2020, with pretax profit increasing 7.8% to GBP55.6 million from GBP51.6 million. Adjusted earnings before interest, tax, depreciation and amortisation rose 11% to GBP63.0 million.
For 2022, the company expects revenue growth between 14% and 17%, to a range of GBP355 million to GBP365 million. Fevertree cautioned that commodity prices have increased "dramatically" in recent weeks, and it expects to deliver Ebitda between GBP63 million and GBP66 million for the year ahead - at best this will represent growth of 4.8% on 2021.
By Lucy Heming; lucyheming@alliancenews.com
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