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(Alliance News) - Stocks in London ended mostly lower on Tuesday as investors took a cautious approach to the prospects of financial aid in the US and whether the ambitious plans will come to fruition.
Speaking before the Senate Finance Committee, US Treasury Secretary nominee Janet Yellen urged lawmakers to do more to combat a pandemic-induced recession, by supporting the incoming Joe Biden-led administration's massive USD1.9 trillion rescue package to help the economy.
Yellen, who served as chair of the US Federal Reserve from 2014 to 2018, said: "Without further action, we risk a longer, more painful recession now - and long-term scarring of the economy later."
The FTSE 100 index closed down 7.70 points, or 0.1%, at 6,712.95. The FTSE 250 ended down 36.45 points, or 0.2%, at 20,602.89, and the AIM All-Share closed up 4.32 points, or 0.4%, at 1,178.59.
The Cboe UK 100 ended down 0.2% at 667.92, the Cboe UK 250 closed down 0.4% at 17,881.41, and the Cboe Small Companies ended up 0.2% at 12,334.39.
In Paris the CAC 40 ended up 0.3%, while the DAX 30 in Frankfurt ended up 0.2%.
"The backdrop to the session's trading was Janet Yellen's confirmation hearing in front of the Senate Finance Committee, an appearance that is the initial litmus test for the Biden administration's stimulus package - a package that has so far failed to set the markets on fire. Cautious after being burned by past experiences, investors appear to be in wait and see mode over the likelihood of the USD1.9 trillion deal escaping the Senate intact," said Spreadex analyst Connor Campbell.
In the FTSE 100, RELX closed up 0.5% after Exane BNP raised the data analytics and publishing company to Neutral from Outperform.
Languishing at the other end of the large caps, Entain ended the worst performer, down 12%, after suitor MGM Resorts International abandoned its pursuit of the Ladbrokes Coral owner.
The proposed takeover offer was 0.6 MGM shares for each Entain share, which, based on closing prices on December 31, represented a value of 1,383 pence per Entain share and a premium of 22% to Entain's share price.
However, the FTSE 100-listed firm told the Las Vegas, Nevada-based casino operator that the bid "significantly undervalues the company and its prospects". MGM shares were up 3.5% in New York.
The pound was quoted at USD1.3616 at the London equities close, up from USD1.3570 at the close Monday.
The euro stood at USD1.2127 at the European equities close, higher from USD1.2075 late Monday, following positive economic data from the continent.
The ZEW indicator of economic sentiment for Germany climbed 6.8 points to 61.8 in January, topping market forecasts of a smaller rise to 60.
The sentiment for the current situation improved to minus 66.4 from minus 66.5 in December. A decline to minus 68.5 was expected, according to FXStreet-cited consensus.
In addition, economic sentiment in the eurozone improved to 58.3 in December, from 54.4, and beating market forecasts of a decline to 45.5.
Analysts at FXPro commented: "With the exception of three months in 2020, when sentiment was recovering from the crash, current index levels have not been seen consistently for more than 15 years. This corresponds to a period of rapid strengthening of the single currency. German business optimism with a rising euro was a clear signal that companies can maintain their share of global exports.
"At the start of the century, the optimism of German business was against the background of an extremely fast-growing China, which was building factories at the expense of German technology, and a softer than necessary US monetary policy made it easier for businesses to borrow. All of these factors are still in place today. If they remain in place, it will be a positive sign for the euro."
Against the yen, the dollar was trading at JPY103.91, up from JPY103.70 late Monday.
Stocks in New York were higher at the London equities close after being closed on Monday for a holiday, boosted by the proximity of President-elect Biden's inauguration on Wednesday and prospects for a big spending package to boost the economy.
The DJIA was up 0.5%, the S&P 500 index up 0.6% and the Nasdaq Composite up 0.7%.
The gains in equity markets came as major banks reported earnings, but with mixed results amid the pandemic.
Goldman Sachs Group reported sharp growth in income in the fourth quarter of 2020, after the investment bank saw every unit record growth.
In the three months to December 31, the New York-headquartered investment bank and financial services firm recorded net interest income of USD1.41 billion, improved from USD1.07 billion the year before. Net earnings jumped sharply to USD4.51 billion from USD1.92 billion, with diluted earnings per share growing to USD12.08 from USD4.69.
The stock was down 1.9% in New York.
Bank of America Corp reported a drop in income in the fourth quarter, with the lone bright spot being its Global Markets unit, but has unveiled a bumper shareholder return package for the first quarter of 2021.
In the three months to December 31, the Charlotte-headquartered investment bank and financial services firm saw net interest income slip to USD10.25 billion from USD12.14 billion. Net income fell to USD5.47 billion from USD6.99 billion.
Diluted earnings per share slipped to USD0.59 from USD0.74. Total revenue in the final quarter of 2020 slipped to USD20.10 billion from USD22.35 billion.
The stock was down 0.1% on Wall Street.
Brent oil was quoted at USD55.93 a barrel at the equities close, up sharply from USD54.90 at the close Monday, amid a fall in the dollar.
"Crude prices are rallying following a weaker dollar but are nothing to brag about considering the slide seen at the end of last week. Covid new variants from the UK and Denmark have the energy markets nervous that the short-term outlook could get a lot worse. Both new variants are more infectious than the original virus and that could lead to the tightening of restrictions across the globe over the next couple of weeks," said Oanda Markets analyst Edward Moya.
Gold was quoted at USD1,839.70 an ounce at the London equities close, higher against USD1,836.71 late Monday.
The economic events calendar on Wednesday has inflation data from the UK and the eurozone at 0700 GMT and 1000 GMT respectively. In the afternoon, the Bank of Canada interest rate decision is at 1500 GMT.
The UK corporate on Wednesday has trading statements from fashion house Burberry Group, books and stationery retailer WH Smith and from pub chain JD Wetherspoon.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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