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(Alliance News) - Share prices in London rose at the open on Wednesday, ahead of a flash inflation reading from the EU and a keenly awaited talk by the head of the US Federal Reserve.
"Investors will be watching closely for clues from Fed Chair Jerome Powell during his speech later in Washington, DC. They are desperate for indications about the trajectory of rate rises and how high they will have to go, to bring down the price spiral," said Susannah Streeter at Hargreaves Lansdown.
CMC Market's Michael Hewson added that Wednesday's flash reading of eurozone inflation could "set the scene" as to whether the European Central Bank goes for a 50 basis point interest rate hike or a 75 point hike when it next meets.
The FTSE 100 index opened up 28.97 points, 0.4%, at 7,540.97. The FTSE 250 was up 60.83 points, 0.3%, at 19,246.99, while the AIM All-Share was up just 0.39 point at 844.61.
The Cboe UK 100 was up 0.3% at 753.97, the Cboe UK 250 was up 0.3% at 16,667.20, and the Cboe Small Companies was up 0.3% at 13,212.81.
The flash consumer price index print for the eurozone and EU comes in at 1000 GMT. Fed Chair Powell will speak at 1830 GMT.
Former ECB president Jean-Claude Trichet said that persistently high inflation in the eurozone is a cause for concern.
"We have experienced a period where we lost control on [sic] inflation, which was in the 1970s. We know the cost of losing control of inflation. We have to avoid that," Trichet told dpa in Frankfurt.
With its recent decisions, the European Central Bank, of which Trichet was president from 2003 to 2011, has set the right course, according to Trichet. "The ECB has done what should be done, and in my opinion they will continue to do what is needed," he said.
He added that he is confident the eurozone will be back to "its definition of price stability, around 2%, in three years time."
In Europe, the CAC 40 index in Paris was up 0.4% and the DAX 40 in Frankfurt was up 0.5%.
In London, UK Ofgem confirmed a five-year investment package for the electricity distribution network companies to help deliver "cheaper, cleaner, more reliable local grids".
FTSE 100-listed utilities SSE and National Grid noted Ofgem's final determination on the RIIO-ED2 electricity distribution price control, which will run from April 1, 2023 to March 31, 2028.
Both firms said they will now review the decision.
Ofgem explained that networks will be expected to provide "more benefits" under the price-control plan by lowering returns to investors and driving more efficiencies within their companies. It also aims to move away from the import of fossil fuels to the UK.
National Grid said it will make its decision on whether to accept or appeal the licence by February 2023. SSE said its assessment will "run into next year".
Shares in National Grid were up 0.5%, while SSE shares were up 0.8%.
Elsewhere in the FTSE 100, Rolls-Royce was up 2.1% after Barclays started the engine maker with 'overweight' and a price target of 110 pence.
In the FTSE 250, Home REIT rose 6.5% after it responded to the short selling report by Viceroy Research.
The investor in accommodation for homeless people said it is "completely confident in the integrity of the business it is operating, its financial soundness and the beneficial impact the company is having in reducing homelessness in the UK."
It expressed "deep frustration" that it is spending time and resources responding to "baseless and misleading allegations".
Home REIT rebutted five allegations made by Viceroy, including claims that its tenants do not appear to be paying rent and that the firm has systematically inflated the prices of properties on its balance sheet.
Pennon was down 3.3% after it reported a 74% drop in pretax profit in the six months that ended September 30.
The water utility and waste management firm's pretax profit fell to GBP22.5 million from GBP90.4 million as its operating costs jumped to GBP250.9 million from GBP189.9 million.
Looking forward, Pennon said it expects its full-year results to be weighted to the first-half. It added that operating costs in its second half are expected to continue to increase alongside rising inflationary pressure. Pennon expects financial 2023 revenue of GBP792.3 million, down from previous guidance.
The dollar strengthened slightly in early morning trade.
"The next clear catalyst [for the dollar] on the agenda is a speech by Fed Chair Powell tonight at 1930 CET discussing the economy and the labour market," said Chris Turner at ING.
The pound was quoted at USD1.1979 early Wednesday in London, marginally down from USD1.1982 at the London equities close on Tuesday. Against the yen, the dollar was trading at JPY138.47, up from JPY138.38.
"Dollar price action after Chair Powell's speech should also tell us something about FX positioning. If the dollar fails to rally on a hawkish speech it may continue to tell us that the market is caught long dollars at higher levels and that some further consolidation may be due into December," Turner continued.
The euro stood at USD1.0356 shortly after the European equities open on Wednesday morning, slightly higher against USD1.0340 late Tuesday.
Spanish and German inflation figures came in lower than expected on Tuesday. As a result, markets appear to be expecting a lower reading in the wider eurozone on Wednesday, ING's Turner explained.
"The impact of the inflation story on the EUR/USD has been, predictably, limited. External factors and dollar dynamics continue to drive the pair's performance, and we see downside risks today given that Fed Chair Powell is scheduled to speak later," he continued.
Stocks in Asian were mixed on Wednesday as investors grappled with news of continuing unrest and poor economic data in China.
The Shanghai Composite closed up 0.1%, and the Hang Seng in Hong Kong closed up 2.2%. The Nikkei 225 in Tokyo ended down 0.2% and the S&P/ASX 200 in Sydney closed up 0.4%.
China's factory activity shrank for a second straight month in November, official data showed, as large swathes of the country were hit by Covid-19 lockdowns and transport disruptions.
The purchasing managers' index came in at 48.0, down from October's 49.2 and well below the 50-point mark separating growth from contraction, according to data from the National Bureau of Statistics.
The manufacturing PMI has been in contraction territory for all but four months of the year so far.
The news came as fresh clashes have broke out between police and protesters in a southern Chinese city, as part of a wave of Covid lockdown-sparked demonstrations across the country.
Brent oil was quoted at USD85.04 a barrel early Wednesday, flat against USD85.06 late Tuesday. Gold fetched USD1,756.12 an ounce, higher than USD1,753.25.
By Heather Rydings; heatherrydings@alliancenews.com
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