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(Alliance News) - Stocks in London were trading broadly higher early Wednesday as investors looked ahead to a major interest rate decision later in the day by the US Federal Reserve.
"The main question today is whether we see the Fed move by 75bps today, or by 100bps which some started to call for in the middle of last week, after US core prices turned out to be much stickier than expected," said CMC Markets' Michael Hewson.
The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1800 GMT. This will be followed by a press conference with Fed Chair Jerome Powell at 1830 GMT.
The market largely expects another 75 basis point - three quarters of a percentage point - rate hike.
The FTSE 100 index was up 20.85 points, or 0.3%, at 7,212.42 early Wednesday. The mid-cap FTSE 250 index was up 36.73 points, or 0.2%, at 18,567.60. The AIM All-Share index was down 3.70 points, or 0.4%, at 852.05.
The Cboe UK 100 index was up 0.4% at 720.48. The Cboe 250 was up 0.2% at 15,905.56, and the Cboe Small Companies up 0.4% at 12,631.63.
The Bank of England will announce its own interest rate decision on Thursday, giving investors even more to consider on Wednesday.
The BoE is expected to hike by 50 basis points.
The UK interest rate announcement precedes the new Westminster government's 'mini-budget' on Friday.
Prime Minister Liz Truss said she is willing to be unpopular to bring in measures she believes will grow the economy, as she admitted her tax cuts will disproportionately benefit the rich.
Truss confirmed she would be reversing the national insurance hike and axing the planned increase to corporation tax, ahead of Chancellor Kwasi Kwarteng's mini-budget on Friday.
The Times reported that Kwarteng also is planning to announce a cut in stamp duty in a further attempt to boost growth – although Downing Street refused to comment.
In mainland Europe, the CAC 40 in Paris was down 0.7% early Wednesday, while the DAX 40 in Frankfurt was down 0.8%.
The European Central Bank is determined to stop soaring inflation becoming the norm, its president said Tuesday, as the coronavirus pandemic and the Russian invasion of Ukraine put lasting pressure on prices.
At its last meeting earlier this month, the ECB raised its interest rates by a record large 75 basis points, as it sought to tame the surge in consumer prices.
Looking ahead, the ECB is likely to "raise interest rates further over the next several meetings", ECB President Christine Lagarde said.
In the FTSE 100, Aveva was up 2.4% on a a takeover offer from French industrial group Schneider Electric for the remaining 41% of the company that it does not already own.
Schneider Electric owns a 59% stake and has agreed to acquire the outstanding shares in Aveva for 3,100 pence per share in cash, implying an enterprise value of GBP10.15 billion for the entire company.
The takeover is expected to complete in the first quarter of 2023.
Schneider Electric had been considering a full takeover of Aveva since late August. Schneider has held a majority stake in Aveva since 2018, when the Aveva had merged with Schneider's own software business.
Schneider last year seconded one of its executives, Peter Herweck, to be chief executive officer of Aveva.
Flutter Entertainment shares lost 3.0% as Citigroup cut its rating to 'neutral' from 'buy'.
In the FTSE 250, Games Workshop fell 6.4% as the miniature wargames maker and retailer said it expects profit in the three months ended August 28 to below the previous year.
Pretax profit is expected at GBP39 million, down from GBP45 million the previous year. Core revenue, meanwhile, is expected to grew to GBP106 million from GBP98 million.
Moving forward, Games Workshop said it will focus on sales growth and cost management.
Elsewhere in London, Pendragon fell 4.5% despite reporting an "encouraging" start to the year as it upped interim revenue and profit.
Revenue in the six months to June 30 totalled GBP1.85 billion, up 1.6% from GBP1.82 billion the previous year. Pretax profit totalled GBP32.9 million, up 6.8% from GBP30.8 million.
Ten Entertainment jumped 4.2% as the bowling alley operator swung to a pretax profit and saw revenue multiply.
In the six months ended June 26, Ten Entertainment swung to a pretax profit of GBP21.0 million from a loss of GBP10.8 million as revenue surged to GBP63.2 million from GBP10.6 million.
The firm said it was "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.
Sterling was quoted at USD1.1342 early Wednesday, down from USD1.1404 at the London equities close on Tuesday.
"The dollar has retained good momentum so far this week, largely benefiting from safe-haven demand as risk sentiment has remained quite fragile," explained Francesco Pesole at ING.
"While some wait-and-see approach would normally prevail in GBP crosses ahead of tomorrow's big Bank of England announcement, the [Federal Open Market Committee meeting] and incoming news on domestic policy proposals mean that the pound may remain volatile today."
The euro traded at USD0.9902 early Wednesday in London, down from USD0.9989 late Tuesday.
"With such a large risk event on the calendar, it's hard to see EUR/USD being driven by anything else than the Fed today," Pesole continued.
Against the yen, the dollar was quoted at JPY143.57, down from PY143.75.
In China, the Shanghai Composite closed down 0.2% on Wednesday, while the Hang Seng index in Hong Kong was down 1.6% in late trade. The Nikkei 225 index in Tokyo closed down 1.4%. The S&P/ASX 200 in Sydney closed down 1.6%.
The Asian Development Bank on Wednesday cut its 2022 growth forecast for developing Asia, with crippling Covid-19 lockdowns in China, conflict in Ukraine and efforts to combat inflation dragging on the region.
While easing pandemic restrictions had spurred consumer spending and investment in the region, the Philippines-based bank warned of "global headwinds" to the recovery as food and fuel prices soared and central banks hiked interest rates.
Brent oil was trading at USD92.91 a barrel, up from USD90.82 late Tuesday. Gold was quoted at USD1,672.82 an ounce, higher than USD1,664.71 on Tuesday.
By Heather Rydings; heatherrydings@alliancenews.com
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