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(Alliance News) - Stock prices in London opened mixed on Thursday after the US Federal Reserve remained relaxed about rising bond yields on Wednesday and as investors look ahead to the Bank of England's own monetary policy decision at midday.
The FTSE 100 index was down 5.27 points, or 0.1%, at 6,757.40. The mid-cap FTSE 250 index was up 50.16 points, or 0.2%, at 21,608.71. The AIM All-Share index was 0.1% lower at 1,200.26.
The Cboe UK 100 index was down 0.4% at 673.32. The Cboe 250 was up 0.3% at 19,275.66, and the Cboe Small Companies up 0.1% at 13,948.44.
In mainland Europe, the CAC 40 in Paris was up 0.1%, while the DAX 30 in Frankfurt was 1.1% higher.
"Once again the black sheep of the Western markets, the FTSE fell in anticipation of the Bank of England's Thursday get-together. Like the Fed, [Governor] Andrew Bailey and the [Monetary Policy Committee] will be walking a tightrope, needing to celebrate the vaccine-led economic recovery in the UK, reassure about the impact of rising inflation on interest rates, and soothe concerns that the central bank will be turning off the taps any time soon," said Spreadex analyst Connor Campbell.
The Fed on Wednesday signalled that interest rates will remain at near zero through until 2023. The central bank also upped its median projection of US economic growth in 2021.
The policy-setting Federal Open Market Committee left its benchmark rate unchanged in the range of 0% to 0.25%, as widely expected. The US central bank also left its quantitative easing programme unchanged.
A median Fed projection tipped US gross domestic product to grow 6.5% as the country's Covid-19 vaccination programme continues apace.
The Fed's December prediction was for economic growth of 4.2% in 2021. Forecasts for 2022 have been raised to 3.3% from 3.2%, but the outlook for 2023 has been lowered to 2.2% from 2.4%.
While the outlook has improved due to rapid action by Congress, the US economy is far from a full recovery and the central bank will continue to provide stimulus, Fed Chair Jerome Powell said.
While some board members were edging towards a rate hike by 2023, investors were reassured by projections that borrowing costs will likely stay where they are until possibly 2024, even if inflation surges.
In the FTSE 100, Standard Life Aberdeen was the best performer, up 2.1%, after Deutsche Bank raised the investment manager to Buy from Hold.
Precious metals miners Fresnillo and Polymetal International were up 2.0% and 1.6% respectively, tracking spot gold prices higher. Gold was trading at USD1,741.88 an ounce Thursday morning, up from USD1,727.63 late Wednesday, after dovish tones from the Fed.
NatWest Group was up 1.5% after Goldman Sachs promoted the state-backed lender to its Conviction Buy List.
Ocado Group was up 0.9%. Ocado Retail, a joint venture between Ocado Group and Marks & Spencer, said retail revenue grew 40% in the 13 weeks to February 28, reflecting strong demand for online grocery during the latest lockdown.
The average order size was GBP147 in the period, as a result of seasonal strength over the Christmas holiday and "a temporary reversal of the trend towards normalised shopping behaviour in response to further national lockdown measures in the UK".
At the other end of the large-caps, M&G was the worst performer, down 6.0%, after the stock went ex-dividend meaning new buyers no longer qualify for the latest payout.
National Grid was 1.7% lower after the UK power lines operator said it will acquire Western Power Distribution from US energy firm PPL Corp for GBP7.8 billion and will offload the UK national gas transmission system under a plan to increase its focus on electricity.
In a separate transaction, National Grid will sell its Rhode Island utility business - Narragansett Electric Co - to PPL for USD3.8 billion. National Grid said it will launch a process later this year to sell a majority stake in National Grid Gas as it looks to boost its electricity assets from around 60% to about 70% of its overall portfolio.
On AIM, Fevertree Drinks was 8.5% lower after the tonic water maker reported a drop in annual profit as lockdown restrictions hurt on-trade sales by forcing the closures of bars and restaurants.
For 2020, revenue was GBP252.1 million, down 3% from GBP260.5 million in 2019, and pretax profit was GBP51.6 million, down 29% from GBP72.5 million. Its adjusted earnings before interest, tax, depreciation and amortisation margin was 22.6%, down from 29.6%.
Looking ahead, Fevertree reintroduced guidance and anticipates revenue growth of 12% to 16% in 2021 and Ebitda margins consistent with 2020.
"Soft guide on margin could take 15% out of street earnings in 2021. Fevertree is a unique asset offering a leveraged play on spirits premiumisation trends, in a sub-category where there is a disconnect between premium spirits and mixers. Whilst we detect increased optimism on the US opportunity, at 9.2 times 2022 sales and 45.8 times price-to-earnings, we see good news is priced in and shares will likely be weak first thing given potential mid-teens downgrade," said analysts at Jefferies.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 1.0%. In China, the Shanghai Composite ended up 0.5%, while the Hang Seng index in Hong Kong finished up 1.2%. The S&P/ASX 200 in Sydney closed down 0.7%.
The dollar was weaker in the wake of the Fed's rate decision. The pound was quoted at USD1.3970 on Thursday morning, up sharply from USD1.3873 at the London equities close Wednesday.
Sterling rose as focus turns to the latest Bank of England interest rate decision at 1200 GMT. The BoE is set to leave rates unchanged and continue dismissing the chances of negative borrowing costs.
The euro was priced at USD1.1955, higher from USD1.1900. Against the yen, the dollar was trading at JPY109.15, down from JPY109.29.
Brent oil was quoted at USD67.73 a barrel Thursday, up from USD67.64 at the London market close on Wednesday.
Thursday's economic calendar has the latest US jobless claims data at 1230 GMT.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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