(Alliance News) -Â Markets were treading water on Wednesday as traders mulled the investment risks associated with inflation and monetary policy tapering.
The UK domestic-focused FTSE 250 was outpacing London's blue-chip FTSE 100 index as it got an M&A boost. Mid-cap Vectura has agreed to be taken over in a GBP958 million deal, while shares in FTSE 250-listed Mediclinic rose after investee Spire Healthcare agreed to be bought out.
The FTSE 100 index was down 18.40 points, or 0.3%, at 7,011.39 on Wednesday. The mid-cap FTSE 250 index was up 186.77 points, or 0.8%, at 22,625.67. The AIM All-Share index was up 0.1% at 1,250.15.
The Cboe UK 100 index was down 0.3% at 698.85. The Cboe 250 was up 0.8% at 20,363.24, and the Cboe Small Companies down 0.1% at 14,859.60.
In mainland Europe, both the CAC 40 in Paris the DAX 30 in Frankfurt were up 0.1%.
Markets were moving in an "indecisive" fashion on Wednesday, said Joshua Mahony, senior market analyst at IG.
"There has been a growing theme around Fed tapering taking shape of late, and commentary from Fed Vice-Chair Richard Clarida furthered the point that we could see the rate of asset purchases trimmed in the coming months," said Mahony. "However, Clarida also reiterated the crucial view that while inflation has been moving sharply higher, this continues to be viewed as transitory in nature."
While the economic calendar has been quiet so far this week, things will pick up on Thursday with a US gross domestic product reading at 1330 BST. Core personal consumption expenditures, containing the Fed's preferred inflation indicator, are due at the same time.
Core PCE is expected to grow 2.3% in the first quarter on a sequential basis, according to FXStreet, in line with the preliminary reading released in April and picking up from 1.3% at the end of 2020.
New York is set for modest gains on Wednesday, with the Dow Jones, S&P 500 and Nasdaq Composite all called up 0.3%. Meanwhile, the US dollar was trading on a soft note.
"With Fed officials pointing to the transitory nature of the inflation increase, there is little need for the market to price in any imminent and meaningful Fed policy normalization. Coupled with the recovering global economy and signs of a more synchronised growth outlook, this is not an environment where USD would flourish," said ING.
Sterling was quoted at USD1.4162 on Wednesday, up on USD1.4128 at the London equities close on Tuesday, with concerns over coronavirus variants outweighed by news that the NHS in England has invited those aged over 30 to book a Covid-19 vaccine.
About one million people aged 30 and 31 will get a text message in coming days asking them to come forward for their Covid vaccine. UK Health Secretary Matt Hancock praised the "phenomenal pace" of the vaccination programme.
The euro traded at USD1.2237 at midday London time, flat on USD1.2236 late Tuesday. Against the yen, the dollar was quoted at JPY108.90, down slightly from JPY108.96.
Gold was quoted at USD1,906.93 an ounce on Wednesday, rising from USD1,892.55 on Tuesday. Brent oil was flat at USD68.71.
In London, Croda International topped the FTSE 100, rising 2.8% after Goldman Sachs raised the specialty chemicals firm to Buy from Sell.
At the bottom of the blue-chips was Intertek, down 4.4%. The London-based assurance, inspection, product testing and certification company said revenue in the first four months of the year fell 3.0% year-on-year to GBP855.4 million from GBP881.6 million, though on a constant currency, like-for-like basis, revenue was 2.7% higher year-on-year.
Intertek's fortunes improved in March and April. In the first two months of the year, like-for-like revenue fell 4.1% on a constant currency basis, before increasing 9.3% in March and April.
Shooting to the top of the FTSE 250 was Vectura, shares jumping 32% to 161.2p after agreeing to be taken over by Carlyle Group for GBP958 million.
The private equity firm will pay 136 pence per share for the Wiltshire-based drug maker, while shareholders will be entitled to a further 19p per share interim dividend. Based on the total value of 155p per share, the offer values Vectura at GBP958 million and is a 27% premium to the Tuesday closing price of 122p per share.
Vectura makes inhaled medicines, including the Flutiform asthma drug, and drug-delivery devices. Since 2019, it has been moving towards a contract business model in which it supplies services to pharmaceutical firms, rather than developing its own drugs.
In other M&A news, Spire Healthcare accepted a GBP1 billion takeover offer from clinical practices operator Ramsay Health Care.
The offer of 240 pence per share in cash is 24% above Spire's closing price on Tuesday of 193.00p. The offer values Spire's entire share capital at GBP999.6 million and gives the hospital operator an enterprise value, including debt, of GBP2.06 billion.
Spire shares were up 24% at 239.52p at midday, while FTSE 250-listed investor Mediclinic, which holds just shy of a 30% stake, was up 5.8%.
Marks & Spencer rose 6.9% despite swinging to an annual loss, as it hailed its transformation in the year.
Revenue in the financial year that ended April 3 fell 10% to GBP9.16 billion from GBP10.18 billion. The financial year had the benefit of an extra week, though its trading was severely hurt by the Covid-19 pandemic. M&S swung to a pretax loss of GBP209.4 million from a GBP67.2 million profit.
"Our results for the year bear the impact of the pandemic spanning the beginning of the ï¬rst national lockdown through to near to the end of the third lockdown in the UK. However, they also reflect an acceleration of the transformation which enabled the business to deliver a resilient performance," the clothing, homewares and food retailer said.
C&C was the worst performing mid-cap, down 11% as it, likewise, swung to an annual loss. The Bulmers and Magners cider maker also announced plans for a GBP151 million fundraise, to secure vital cash as Covid-19 curbs ease.
The Dublin-based drinks manufacturer and distributor said it will raise the money through a rights issue. New shares will be offered at a price of 186 pence per share on the basis of 6 new shares for every 23 existing shares.
In the financial year ended February 28, revenue dropped 56% to EUR736.9 million from EUR1.68 billion. The company swung to a pretax loss of EUR121.3 million from a EUR11.6 million profit.
By Lucy Heming;Â lucyheming@alliancenews.com
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