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LONDON (Alliance News) - UK stocks closed flat to slightly higher Wednesday, with the FTSE 100 ending the day in positive territory for the third day in a row, as investors opted for caution ahead of the release of US Federal Open Market Committee meeting minutes after the London close.
"There was never going to be much movement in markets before the release of Fed minutes so most of the day was spent nervously watching the raid on terrorist suspects unfold in Paris," said Jasper Lawler, market analyst at CMC Markets.
In the latest developments, two people were killed and seven detained when police raided a northern Paris suburb in an attempt to capture the alleged mastermind of last Friday's barbaric terrorist attacks that left at least 129 people dead and 352 injured.
It was not immediately clear if the alleged mastermind, 28-year-old Abdelhamid Abaaoud, was among the dead or the seven people who were detained during the raid in the Saint-Denis suburb, with the suspects yet to be identified. However, surveillance, phone conversations and witness statements led police to believe that Abaaoud could be in the apartment, according to French prosecutor Francois Molins.
The FTSE 100, which had gotten off to a weak start, overturned early losses following a strong open on Wall Street to end the day up 0.2% at 6,278.97, meaning that it has closed higher for three consecutive sessions. The FTSE 250, meanwhile, closed almost perfectly flat at 17,089.09 and the AIM All-Share index closed up 0.1% at 729.23.
In Europe sentiment was less positive. The CAC 40 in Paris ended the day down 0.6%, while the DAX 30 in Frankfurt closed down 0.1%.
Amid a dearth of major macroeconomic data, investors opted to keep their powder dry ahead of the release of the Federal Open Market Committee's minutes from the October 27-28 meeting at 1900 GMT, which will be examined for any clues that point to an interest rate hike in the December 15-16 meeting.
"The Federal Reserve minutes released later today are likely to continue the hawkish tone put out by FOMC members since October's policy decision," said CMC Markets' Lawler. "To that extent, the minutes shouldn't change the current narrative, leaving markets to trade within existing ranges," he added.
Lloyds Banking Group's senior economist Rhys Herbert noted that the October meeting was before the stellar October jobs report which heightened expectations for a rate hike to December, but said the minutes from the October meeting will be important to explain the unexpectedly hawkish post-meeting press statement.
"In particular, markets will be looking for evidence on how ready the majority of members are to raise interest rates in December and the extent of any opposition to such a move," Herbert said.
Still, it should be noted that many investors have already set their sights on December for a rate hike, with findings from the November Bank of America Merrill Lynch fund manager survey showing 81% of participants expect the Fed to raise interest rates in December, up from 47% in the October survey.
In some of the only macroeconomic data to be released Wednesday, the US Commerce Department released a report showing that US housing starts fell by much more than expected in the month of October.
The report revealed that housing starts tumbled by 11.0% to an annual rate of 1.060 million in October from the revised September estimate of 1.191 million. Economists had expected housing starts to fall to a rate of 1.162 million from the 1.206 million originally reported for the previous month.
At the same time, the Commerce Department said that building permits, an indicator of future housing demand, climbed 4.1% to an annual rate of 1.150 million from the revised September rate of 1.105 million.
On Wall Street, at the close of the UK-equity market, the DJIA, NASDAQ Composite and S&P 500 were all trading between 0.6% and 0.7% higher.
In the forex market, the pound traded at USD1.5199 at the UK stock market closing bell, while the euro traded at USD1.0632. At the same time on Tuesday, the currencies had traded at USD1.5218 and USD1.0640, respectively.
Brent oil, meanwhile, was quoted at USD43.73 a barrel at the UK equity market close Wednesday, having stood at USD44.11 at the same time on Tuesday. Gold traded at USD1,068.43 an ounce, slightly below the USD1,074.32 an ounce seen at the same time on Tuesday.
At the individual UK equity level, International Consolidated Airlines Group, closing down 3.2%, and easyJet, closing down 0.9%, were among the leading fallers in the FTSE 100 after two Air France flights travelling to Paris from the US were diverted due to anonymous bomb threats. The incident adds to concerns about the impact of the terrorist attacks in Paris on airlines and travel companies.
Wealth manager St James's Place and fund supermarket Hargreaves Lansdown were two more heavy fallers in the blue-chip index, ending down 1.0% and 0.8% respectively. The Financial Conduct Authority, the UK's financial regulator, set out the terms of a study to investigate the UK's GBP6.6 trillion asset management industry, with competition and costs to be probed by the regulator as scrutiny of the wholesale financial markets intensifies.
The FCA will look at questions about the difficulty investors have in monitoring the performance of asset managers, the role of investment consultants and potential conflicts of interest arising from the provision of advice and asset management services, and the ability of asset managers to control costs borne by investors, among other issues. Both retail and institutional investors will be considered under the study.
At the other end of the spectrum, drug company Hikma Pharmaceuticals was among the leading risers in the FTSE 100, closing up 4.9% after it said it has received a letter from the US Food and Drug Administration closing out a previous warning letter it had received from the regulator.
Hikma said the letter closes out the warning letter it had received from the FDA in October 2014 regarding its injectables manufacturing plant in Portugal. The company said the FDA has accepted the remedial actions it took to fix the problems at the manufacturing plant, which had centred on environmental monitoring issues.
Antofagasta, closing up 5.8%, and Anglo American, closing up 4.3% were also among the biggest risers in the blue-chip index after they were upgraded to Neutral from Sell by Goldman Sachs.
In the FTSE 250, Hunting was another beneficiary of a Goldman Sachs note. The investment bank added the oil services company to its Conviction Buy list, saying the stock's valuation offers a very good buying opportunity. Hunting ended that day as the best mid-cap performer, up 10%.
Drax Group, closing down 4.2%, was among the heaviest fallers in the mid-cap index. The UK government outlined plans to close all coal-fired power stations in the country by 2025 and shift its focus to gas and said it will consider whether any reform is required to the system operator model for National Grid.
Amber Rudd, the Energy and Climate Change Secretary, confirmed earlier reports that the government will open a consultation on closing all remaining coal-fired power stations in the UK by 2025, a move she said would make the UK one of the first developed countries to take coal out of the power generation system.
The government will aim to replace the coal-fired stations with gas-fired alternatives, though Rudd said the changes would only go ahead if consultation found the switch could be carried out within the timescale tabled.
Rudd, speaking at the Institution of Civil Engineers, also reiterated the government's support for building nuclear power stations in the UK and committed to supporting the offshore wind industry, provided the cost of generating power via this method is brought down.
Rudd also said that as the energy system changes, a strong case is raised for greater independence for the electricity system operator, currently National Grid, in order for it to be able to make the necessary changes to adapt to the market shifts. Shares in FTSE 100-listed National Grid closed down 0.3%.
In the data calendar Thursday, the Bank of Japan's interest rate decision, monetary policy statement and press conference are all due ahead of the UK equity market open, with the Japanese all industry activity index reading for September expected at 0430 GMT. Current account data for the eurozone for September are due at 0900 GMT, shortly before UK retail sales data for October at 0930 GMT.
According to FXStreet.com, economists' expectations are for UK retail sales to fall by 0.5% month-on-month in October, having grown by 1.9% in September. On an annual basis, retail sales are forecast to rise 4.2%, significantly lower than the 6.5% growth recorded in September.
Later on, the European Central Bank is due to release its monetary policy meeting accounts at 1230 GMT. The accounts contain an overview of the financial market, economic and monetary developments and are followed by a summary of the discussion on the economic and monetary analyses and on the monetary policy stance.
In the US, weekly jobless claims data are scheduled to be released at 1330 GMT, with the US Conference Board's leading indicator reading for October and the Philadelphia Federal Reserve's manufacturing survey for October at 1500 GMT. Investors will also be keeping an eye on a speech by Federal Reserve Bank of Atlanta President Dennis Lockhart at 1730 GMT.
In a busy day in the corporate calendar Thursday, FTSE 100-listed Royal Mail and Johnson Matthey are scheduled to publish half-year results, with Centrica and CRH due to release trading updates.
In the FTSE 250, Grainger and Euromoney Institutional Investor are expected to release full-year results, while Poundland Group, Investec, Senior, Vesuvius, Electrocomponents, QinetiQ Group and Caledonia Investments are all scheduled to publish half-year results. Close Brothers, Interserve, Ted Baker and Berendsen are all expected to publish trading updates.
Also of note, UK blue-chips Bunzl, J Sainsbury, Vodafone Group, Whitbread and Imperial Tobacco Group are joined by mid-caps Edinburgh Investment Trust, Genus, Great Portland Estates, TalkTalk Telecom Group, Scottish Mortgage Investment Trust, Tate & Lyle, Witan Investment Trust, Spire Healthcare Group, P2P Global Investments and Sophos Group, among others, in going ex-dividend Thursday, meaning new buyers no longer qualify for the latest dividend payout.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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