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(Alliance News) - European equities ended higher on Wednesday with fears of a debt crisis at embattled Chinese property firm Evergrande easing, before the US Federal Reserve takes centre-stage with its latest monetary policy decision later this evening.
US equities, which failed to sustain earlier gains on Tuesday and closed mixed, were higher ahead of Wednesday's Fed decision. In London, the gambling sector shone once again on M&A news, while sentiment in Europe was boosted by data showing consumer confidence has crept back above pre-virus levels.
"A series of temporary fixes to ominous global problems has pushed the FTSE 100 back over the psychologically important 7,000 mark, but there's a chance the nuts and bolts may weaken again, and the wheels could fall off the recovery," Hargreaves Lansdown analyst Susannah Streeter commented.
"The deal to settle a domestic bond payment due to be made by the crisis hit Chinese property group Evergrande, seems to have calmed nerves among investors and stopped immediate contagion to other sectors."
The FTSE 100 index ended 102.39 points, or 1.5%, higher at 7,083.37. It was the first time flagship index made a triple-digit points gain since July. The mid-cap FTSE 250 index closed up 173.15 points, 0.7%, at 23,784.54. The AIM All-Share index closed up 8.00 points, 0.6%, at 1,268.13.
The Cboe UK 100 index ended up 1.6% at 704.26. The Cboe 250 was up 1.1%, at 21,619.58. The Cboe Small Companies was 0.8% higher at 15,546.34.
In mainland Europe, the CAC 40 stock index in Paris closed up 1.3% and the DAX 40 index in Frankfurt rose 1.0%.
Evergrande agreed a deal with domestic bondholders that should allow the conglomerate to avoid missing one of its interest payments and avoid default, but its deeper debt burden remains.
The mining sector, with its heavy exposure to the Chinese economy, surged as contagion fears eased. Copper miner Antofagasta climbed 6.9%, Glencore added 3.9% and steel producer Evraz grew 3.3%.
Calming fears of food shortages in Britain, the UK government announced it had struck a deal with carbon dioxide producer CF Industries on Tuesday to provide financial support to restart a plant. Environment Secretary George Eustice said the government would support CF "just for a few weeks" at a cost of "possibly tens of millions" of pounds.
In the food producing space, carbon dioxide's functions include extending the shelf life of food.
Streeter added: "Again this may just be a kludge with only three weeks of financial support guaranteed, and now the energy regulator OFGEM is warning that more energy suppliers could go to the wall. It's clear the crisis in the energy sector is far from over, and companies will be forced to absorb costs, hitting margins or pass rises onto customers, fuelling inflation concerns."
Back in London, Ladbrokes owner Entain surged on the blue-chip index once again, rising 5.1%. The gambling firm provided further details about the takeover approach from Boston, Massachusetts-based Draftkings. Entain had closed 18% higher on Tuesday.
Late Tuesday, Entain had confirmed a report by CNBC that it had received a takeover approach from US sports betting firm DraftKings, but it hadn't provided the price offered.
Entain said on Wednesday that an earlier approach from DraftKings at 2,500 pence per share, which comprised of a combination of DraftKings shares and cash, was rejected. Then, another proposal was received on Sunday by which DraftKings would offer 2,800p per Entain share, consisting of 630p in cash and the balance payable in new DraftKings Class A common shares.
The latest offer represented a premium of 46% to Entain's closing share price on Monday. In response, Entain said it would "carefully consider" the proposal and a further announcement will be made as and when appropriate. Shareholders were urged to take no action.
Draftkings shares were 0.5% lower in New York. London-listed bookmaker were lifted by the news, with Paddy Power owner Flutter closing up 3.8% and 888 Holdings rising 7.1%, while gambling software firm Playtech added 3.1%.
Oxford BioMedica topped London's mid-cap index, surging 11%. The gene and cell therapies company said sales more than doubled in the first half of 2021 thanks to Covid vaccine manufacturing contracts, and it announced an investment from the Serum Institute of India.
The Oxford-based firm made revenue of GBP81.3 million, up from GBP34.0 million in the first half of 2021. That helped it swing to a pretax profit of GBP19.2 million from a loss of GBP6.1 million.
Oxford BioMedica also announced vaccine manufacturer the Serum Institute of India has agreed to make a strategic investment of GBP50.0 million. The Serum Institute will buy 3.4 million newly issued shares for 1,478p each, equal to Tuesday's closing price, giving it a 3.9% stake.
The pound was quoted at USD1.3659 at the London equities close on Wednesday, up from USD1.3643 on Tuesday. Against the Japanese yen, the dollar was trading at JPY109.57, higher against JPY109.26. The euro was priced at USD1.1738, up from USD1.1714.
Consumer confidence in the EU topped pre-virus levels in September, estimates from the European Commission showed on Wednesday. The Directorate-General Economic & Financial Affairs flash consumer confidence estimate showed a rise of 1.1 points in the EU and a 1.3 point hike for the eurozone alone.
At minus 4.0 in the eurozone and minus 5.2 points for the whole of the EU, the two consumer confidence indicators are now above pre-pandemic levels.
"The improvement in the virus situation in the eurozone appears to be lifting sentiment among consumers. The rise in confidence in September means that it averaged -4.6 over Q3 as a whole, up from -5.5 in Q2, when household consumption expanded by 3.7% quarter-on-quarter. This supports our view that household consumption growth accelerated this quarter. Admittedly, retail sales fell in July, and car registrations slid in both July and August, but this is likely the result of consumers switching from buying goods to going out, as restrictions were eased, rather than deciding to no longer spend," Pantheon Macroeconomics analyst Melanie Debono commented.
Ahead of the latest US Federal Reserve interest rate decision, equity prices in New York were higher. The Dow Jones Industrial Average was up 1.1%, the S&P 500 up 1.0% and the Nasdaq Composite was 0.9% higher.
Brent was quoted at USD75.44 a barrel late Wednesday, up sharply from USD73.84 late Tuesday. Gold stood at USD1,778.80 an ounce, down from USD1,781.03.
Analysts at Davy commented: "Fed Chair Jay Powell faces a difficult communications challenge today, especially with President Joe Biden considering his reappointment. Recent softer US data point to a cautious approach from the FOMC as it signals that tapering of the USD120 billion asset purchases will soon begin. However, the 'dot-plot' of rate expectations could provide a hawkish surprise for markets as FOMC members anticipate rate hikes in 2022."
On Thursday, the Bank of England releases its latest interest rate decision at 1200 BST. Analysts widely expect an 8-1 vote in favour of maintaining the quantitative easing programme.
Elsewhere, a slew of flash PMIs are released, including the eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST.
Thursday's local corporate calendar has trading statements from postal services firm Royal Mail and financial services company Investec. DFS Furniture releases annual results.
By Eric Cunha; ericcunha@alliancenews.com
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