(Alliance News) - European equities were flat to slightly higher on Tuesday, as markets tiptoe towards Wednesday's US Federal Reserve interest rate decision.
Stocks in London were outperforming continental peers, helped by good news for online grocer Ocado and by M&A activity.
The FTSE 100 index was up 33.32 points, or 0.5%, at 7,264.76 midday Tuesday. The mid-cap FTSE 250 index was up 52.02 points, or 0.2%, at 22,699.24. The AIM All-Share index was down 4.56 points, 0.4%, at 1,172.92.
The Cboe UK 100 index was up 0.4% at 720.63. The Cboe 250 was 0.1% higher at 20,080.06, but the Cboe Small Companies was down 0.2% at 14,794.95.
In mainland Europe, the CAC 40 stock index in Paris and the DAX 40 in Frankfurt were flat.
"Equity markets are moving cautiously higher on Tuesday, as investors await the plethora of central bank decisions in the coming days that could shape how we end the year," Oanda analyst Craig Erlam commented.
"Omicron has clearly added a huge cloud of uncertainty over the outlook for the economy in the coming months just as many countries were preparing for tighter monetary policy. Investors have appeared far more relaxed than politicians when it comes to the new variant which makes me a little nervous, as booster efforts are doubled in the run-up to Christmas. The question this week is whether central banks perceive inflation or Omicron to be the greater risk."
The US Federal Reserve kicks off the central banking bonanza, but eyes also will be on the Bank of England, particularly after data on Tuesday pointed to a tight labour market in the UK.
The UK unemployment rate edged lower in October, getting closer to pre-virus levels.
Figures from the Office for National Statistics showed the UK unemployment rate was reduced to 4.2% in the three months to October, having sat at 4.3% in September. The October figure came in line with market consensus cited by FXStreet.
The UK jobless rate is now just 0.2 percentage point higher than it was before the pandemic.
"While a rate hike could still happen this week, markets are not positioned for it and instead expect the central bank to hold out until February. With so much uncertainty over Omicron, as it spreads rapidly throughout the UK, and whether more restrictions will be imposed, it makes little sense to act now without a clear picture," Oanda's Erlam added.
The dollar was largely weaker.
The pound was quoted at USD1.3251 midday Tuesday in London, up from USD1.3230 late Monday. The euro stood at USD1.1322, up versus USD1.1283. Against the yen, the dollar was trading at JPY113.49, flat versus JPY113.50.
Adding to the inflation data available to Fed policy makers, the latest US producer price index reading is due at 1330 GMT on Tuesday. Annual US PPI inflation is expected to race to 9.2% in November from 8.6% in October, according to FXStreet cited consensus.
Ahead of the report, US equity market futures were lower. The Dow Jones Industrial Average was called marginally lower, the S&P 500 down 0.2% and the Nasdaq Composite 0.5% lower.
In London, Ocado shares jumped 9.5%, far and away the best large-cap performer as it boasted a legal victory and eyes a strong Christmas for its joint-venture with Marks & Spencer.
A US International Trade Commission patent case verdict, delivered on Monday, "has found in favour of Ocado", the company said.
The dispute was with Norwegian firm Autostore. In October of last year, Autostore had said it sued and already filed complaints in the US and the UK. Autostore accused Ocado's Smart Platform of infringing Autostore's patented technology.
A judge found that three of four Autostore patents are invalid, while a fourth has not been infringed. Ocado is pursuing separate patent claims of its own against Autostore.
On the trading front, Ocado Retail is set for its "best-ever Christmas ahead".
In the fourth quarter ended November 28, retail revenue fell 3.9% annually to GBP547.8 million, though this was up 32% from 2019. Typical shopping baskets are getting smaller. While average orders per week increased 9% annually, order value fell 12%.
Ocado expects the M&S partnership's annual performance to be in line with guidance. For financial 2022, it expects revenue growth at the top of the pre-virus range of 10% to 15%.
M&S shares were down 1.5%.
Telecoms firm BT and pest control company Rentokil sat at the bottom of the FTSE 100, down 6.0% and 8.7%, respectively.
Billionaire telecom tycoon Patrick Drahi lifted his stake in BT to 18% on Monday from 12% but confirmed early Tuesday he has no plans to make a takeover offer.
"We are pleased to take this opportunity to increase our shareholding in BT. Over recent months we have engaged constructively with the board and management of BT and look forward to continuing that dialogue," Drahi said. He added that he supports BT's strategy of rolling out full-fibre broadband in the UK.
Rentokil shares initially rose to a record high after it announced a cash-and-shares deal to buy US pest control peer Terminix Global. The stock has since tumbled, down 7.9% at midday.
The deal values Terminix at USD6.7 billion. Crawley-based Rentokil will issue Terminix shareholders 643.3 million new shares, worth about GBP3.86 billion, and pay USD1.3 billion in cash. The deal implies a value of USD55.00 per Terminix share, a 47% premium to its share price on Monday. Terminix closed 0.2% lower at USD37.41 each in New York on Monday.
"The promise of a stronger market position in the US is obviously exciting for shareholders but could also draw the ire of antitrust regulators across the pond," AJ Bell analyst Russ Mould commented.
Elsewhere in the M&A space, National Express agreed to an all-share merger with smaller peer Stagecoach.
The public transport providers will form a combined group with a fleet of around 40,000 vehicles and a workforce of approximately 70,000 staff. Following completion of the merger, Stagecoach shareholders will own about 25% and National Express shareholders will own around 75% of the combined group.
Stagecoach shares rallied 9.1%. National Express was trading 0.7% higher.
Gold fetched USD1,785.14 an ounce midday Tuesday, down from USD1,788.71 at the London equities close on Monday.
"Investors should note that rising inflation has been supporting prices of the precious metal as it is a safe-haven commodity which rises in times of uncertainty and volatility. However, central bank meetings to be held this week are likely to be the biggest drivers of volatility for gold as hawkish monetary policies, as expected by the Fed, could push gold prices down," Avatrade analyst Naeem Aslam commented.
Brent oil was quoted at USD74.27 a barrel, down from USD75.05.
By Eric Cunha; ericcunha@alliancenews.com
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