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(Alliance News) - Stocks in London were lower at midday on Thursday following pessimistic comments from the US Federal Reserve, while battle lines are being drawn ahead of November's US presidential election.
The US central bank reiterated, in the minutes of its most recent Federal Open Market Committee meeting, that the path of the US economy will depend significantly on the course of the coronavirus which continues to rampage around the country.
In the minutes, released Wednesday, the Fed said its members observed that "uncertainty surrounding the economic outlook remained very elevated".
The central bank said: "Several risks to the outlook were noted, including the possibility that additional waves of virus outbreaks could result in extended economic disruptions and a protracted period of reduced economic activity.
"In addition, members agreed that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near-term and was posing considerable risks to the economic outlook over the medium term."
In London, the blue-chip FTSE 100 index was down 69.00 points, or 1.1%, at 6,042.98. The mid-cap FTSE 250 index was down 59.28 points or 0.3% at 17,524.14, and the AIM All-Share index was flat at 960.30.
The Cboe UK 100 index was down 1.2% at 601.89. The Cboe 250 was down 0.4% at 14,918.68, and the Cboe Small Companies was down 0.3% at 9,612.53.
In mainland Europe, the CAC 40 index in Paris was down 1.2%, while the DAX 30 in Frankfurt was 0.9% lower.
"A sea of red greeted investors on Thursday with equities falling across Europe and Asia, mirroring the performance on Wall Street last night. Markets didn't like the US Federal Reserve's latest comments where it said there were still risks to economic recovery," said AJ Bell's Russ Mould.
In the FTSE 100, InterContinental Hotels Group was up 1.0%. Shares in the Crowne Plaza and Holiday Inn hotel chain owner were higher after French newspaper Le Figaro reported Sofitel hotel owner Accor was exploring options for a merger.
According to Le Figaro, Accor Chief Executive Sebastien Bazin created a team to examine the possibility of a tie-up in early June, alongside Finance Director Jean-Jacques Morin and investment banks Centerview and Rothschild.
A potential tie-up would topple US chain Marriott International from its position as the world's largest hotel operator. Marriott's market value is about USD30.50 billion.
Accor was up 1.0% in Paris. Marriott was up 0.5% in pre-market trade in New York.
At the other end of London's large-cap index, M&G was worst performer down 5.6% after Deutsche Bank downgraded the investment manager to Hold from Buy.
Antofagasta was down 5.5% after the Chilean copper miner slashed its interim dividend by 42%, as first-half earnings took a hit from a drop in copper prices as a result of the coronavirus crisis.
The miner also warned that 2020 copper output will be at the lower end of its original 725,000 to 755,000 tonnes range, and only if no Covid-19 related shutdowns occur during the rest of the year.
For the half-year ended June 30, revenue fell 15% to USD2.14 billion from USD2.53 billion last year as a result of lower realised copper prices and sales volumes, partially offset by the increase in the realised gold price. First-half pretax profit fell by 49% to USD387.5 million from USD763 million.
Antofagasta declared an interim dividend of 6.2 cents, down 42% from 10.7 cents paid out last year.
Standard Life Aberdeen was down 5.1%, Evraz was down 4.9% and Mondi down 4.5%. The stocks went ex-dividend, meaning new buyers no longer qualify for the latest payout.
In the FTSE 250, Frasers Group was the standout performer, up 13% after the retailer said it was seeing signs of normality returning to the UK high street but warned that further lockdowns were a threat.
The Sports Direct owner saw pretax profit for the financial year ended April 26 fall 20% to GBP143.5 million from GBP179.2 million a year prior. Revenue rose 6.9% to GBP3.96 billion from GBP3.70 billion year on year. This increase was driven by premium lifestyle sales, which increased by 35% to GBP722.0 million from GBP535.4 million a year prior, as well as by European retail, which increased by 16% to GBP697.7 million, from GBP599.8 million year on year.
Mike Ashley's company said it plans to invest "in excess" of GBP100 million on upgrading its digital platforms and pushing its designer label business Flannels.
"This strategy is likely to improve gross margins as it shifts towards the sale of higher-priced products, as well as opening new flagship stores and taking existing stores upmarket in order to make them more appealing to third-party brands, notably Nike and Adidas," said AJ Bell's Russ Mould.
The dollar strengthened against counterparts following the release of the Fed minutes hinted forward guidance could be improved upon, though there were no indications about a timetable.
"A number of participants noted that providing greater clarity regarding the likely path of the target range for the federal funds rate would be appropriate at some point," the minutes showed.
The pound was quoted at USD1.3110 midday on Thursday, down from USD1.3190 at the London equities close Wednesday.
The euro was priced at USD1.1838, down from USD1.1896. Against the yen, the dollar was trading at JPY106.00 in London, up from JPY105.73.
"Overall, the perceived small shift towards a more normalized monetary policy led to broad-based US dollar demand which saw the dollar claw back some of its more recent losses," said analysts at OFX.
In commodities, Brent oil was quoted at USD44.84 Thursday midday, lower than USD45.26 a barrel Wednesday evening. Gold was trading at USD1,928.35 an ounce, down from USD1,958.00.
New York is set to open lower despite China's commerce ministry saying Beijing and Washington will soon hold a call on trade. It comes after US President Donald Trump said this week that he had called the discussions off, saying he "didn't want to talk to China right now".
The Dow Jones Industrial Average was called 0.4% lower, while the S&P 500 and the Nasdaq Composite were both called down 0.3%, based on futures trading.
On Wednesday, Wall Street stocks retreated from records on profit-taking despite some strong earnings from retailers and Apple hitting a historic landmark as it became the first US company worth USD2 trillion.
On the political front, former Vice President Joe Biden will accept the Democratic presidential convention in an online address Thursday, setting up a general election showdown with Trump. Kamala Harris made history on Wednesday when she accepted the Democratic nomination for vice president. The California senator became the first black woman on a major party's White House ticket.
Shortly before Harris spoke, America's first black president, Barack Obama, delivered his own condemnation of Trump - and appeal for Biden's election.
Obama said Trump has left America's "worst impulses unleashed, our proud reputation around the world badly diminished, and our democratic institutions threatened like never before."
Biden, who faces Trump on November 3, is due to give his own acceptance speech on Thursday, closing a Democratic convention held wholly online and on television due to coronavirus safety precautions.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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