LONDON (Alliance News) - UK shares were trading lower at midday while Wall Street futures were calling for a higher open, setting up US stocks to rebound from the losses seen Tuesday, which have continued to weigh on European stocks Wednesday.
The FTSE 100 traded down 0.9% at 6,028.10 points, the FTSE 250 was down 0.8% at 16,591.69, and the AIM All-Share was down 0.2% at 715.94. European stocks also were down, with the CAC 40 in Paris off 1.4% and the DAX 30 in Frankfurt down 1.1%.
US futures pointed to a higher open Wednesday, with the Dow 30 seen up 1.3%, the S&P 500 up 1.4% and the Nasdaq 100 up 1.2%. Wall Street ended lower Tuesday, giving up early gains, with the DJIA closing down 1.3%, the S&P 500 down 1.4% and the Nasdaq Composite down 0.4%.
US stocks had initially risen on Tuesday, together with European markets, after the People's Bank of China cut its key interest rates and reserve ratio in an effort to stem heavy losses in its stock market and support its slowing economy.
"The initial euphoria this triggered with the US markets didn’t even last a full trading session, and Europe has once again opened in a sea of red," wrote IG analyst Alastair McCaig. "However it’s worth remembering that we’re still at the tail end of the summer, and equity market volumes still remain particularly thin adding to the market’s ability to exaggerate moves."
China's central bank reduced Tuesday its key interest rates by 0.25 percentage point each, according to its website, the fifth time it has lowered rates since November last year. The benchmark one-year lending rate was cut to 4.6% and the deposit rate to 1.75%. The new rates are effective from Wednesday this week.
The renminbi deposit reserve ratio was lowered by 0.5 percentage point, effective September 6. The ratio for large banks after the move will be 18%. The Chinese central bank said the reduction was intended to maintain reasonably adequate liquidity in the banking system, and promote steady moderate growth of money and credit.
Nomura Chief China economist Yang Zhao said the broker believes that the move reflects the Chinese government willingness to implement accommodative policies to cope with weak growth momentum and contain possible macro risks associated with the equity selloff of recent months.
Nomura forecasts another reserve requirement cut by the PBoC, likely in the fourth quarter on this year, and said it believes that fiscal policy will play a larger easing role in the second half of 2015.
Analysts had said that the recent moves by China's central bank may delay a potential US interest rate hike in September by the US Federal Reserve, with commentators saying it could be pushed back to December. Nevertheless, Fed Chair Janet Yellen had said she expects conditions to be right for the US central bank to lift US rates later this year.
The market also focused on the comments made on Monday by Atlanta Federal Reserve President Dennis Lockhart, who said he expects the "normalisation" of the US monetary policy to begin "some time this year". However, analysts noted that the Fed official had said earlier this month that a rate hike in September could be "appropriate".
Lloyds Bank said there are now "considerable risks" to the bank's 16-17 September Fed meeting "lift-off" call. However, the bank said it is mindful of the US Fed's desire to avoid another "'taper tantrum', not letting market participants and collective positioning 'believe' that extraordinary monetary accommodation is here to stay forever".
Lloyds also highlighted the risks that might emerge in the period between November and December, "which might complicate the execution of a 'lift-off'", compromising the US federal budget and a ‘hard deadline’ for US federal debt limit, among other risks.
New York Fed President William Dudley, who is a current voter on the Federal Open Market Committee, is expected to speak in New York at 1500 BST.
Also in the US economic calendar, there are US Mortgage Bankers Association mortgage approvals at 1200 BST, before US durable goods orders at 1330 BST and Energy Information Administration crude oil stocks at 1530 BST.
In London, despite posting particularly strong results, even WPP was unable to escape the fallers list and traded down 2.6%. The media buying giant reported a sharp rise in pretax profit for its first half, boosted by exceptional gains and an improved operating performance, and reiterated guidance of net sales growth of over 3% for 2015. WPP proposed a dividend of 15.91 pence, up 37% from 11.62 pence a year before.
Outside the FTSE 100, shares in Paddy Power and Betfair Group surged after the companies reached an agreement in principle to merge in an all-share deal.
Under the terms of the merger, Paddy Power shareholders would own 52% of the combined company, with the remaining 48% owned by Betfair shareholders. Immediately prior to completion of the deal, Paddy Power's shareholders would get an EUR80 million special dividend.
Paddy Power was up 18%, while Betfair was up 17%. Meanwhile, rivals Ladbrokes, down 3.6%, and William Hill, down 3.1%, were amongst the worst performers in the FTSE 250.
In the AIM All-Share, Asiamet Resources traded up 43%. The miner said it has identified a high-grade copper zone at the Beruang Kanan copper project in Indonesia. The drilling undertaken at the site has identified a high trade copper zone within the current resource area which has the potential to significantly boost the project economics, the company said.
Marechale Capital traded down 55%. The energy sector investor said that Kettering Borough Council has granted planning permission for Northfield UK Solar's 49.9 megawatt solar scheme at Desborough, but said there remains significant risks involved in the company adding value to its investment. Marechale has a 26% equity stake in Northfield and the solar scheme.
By Daniel Ruiz; danielruiz@alliancenews.com
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31 Oct 2016 09:39
