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(Alliance News) - Stock prices in London were in the green at midday on Wednesday, amid news that the UK service sector only grew slightly in January while activity slowed in the eurozone.
"European and Asian markets were on the front foot on Wednesday amid hopes that Donald Trump might partially wind back tariffs if deals could be struck with Canada and Mexico," commented AJ Bell's Russ Mould. "Investors are looking for any signs that Trump is open to deals...US commerce secretary Howard Lutnick hinted we might soon see an amendment to the tariff structure that came into force this week.
"Markets would take even the slightest rollback from Trump as a positive sign, helping to settle nerves following concerns about a full-blown trade war."
The FTSE 100 index was up 36.85 points, 0.8%, at 8,795.85. The FTSE 250 was up 282.74 points, 1.4%, at 20,233.24, and the AIM All-Share was up 6.86 points, 1.0%, at 693.73.
The Cboe UK 100 was up 0.6% at 880.46, the Cboe UK 250 was up 1.7% at 17,590.34, and the Cboe Small Companies was up 0.1% at 15,537.72.
"There was a clear shift in investor sentiment from risk-off to risk-on," AJ Bell's Mould said. "The top risers and fallers list on the FTSE 100 illustrated this trend. Utilities, tobacco, pharma and telecoms, which are sectors frightened investors would normally hide in, were all out of favour.
"Higher-risk and more economically sensitive sectors such as mining, airlines and packaging were in favour."
For example, around midday the winners included Antofagasta, up 5.4%; easyJet, up 4.1%; and packaging firm Mondi which led the FTSE 100, up 5.9%.
Severn Trent led the laggers, down 3.8%, followed by National Grid which lost 3.6%. British American Tobacco lost 2.9%, the third-worst performer, while Haleon lost 2.7%.
Games Workshop was 5.9% higher, the second-biggest winner after its trading update forecast pretax profit outstripping expectations for the year ending June 1.
"Games Workshop is showing resilience in the face of a difficult market backdrop and it's impressive how it has prospered this year," Mould commented. "[Its] recent promotion to the FTSE 100 puts pressure on management to keep delivering good news.
"They will want to show the world that its inclusion in the premium UK index is not a brief visit and that the business has what it takes to stay in the top league."
On the FTSE 250, Breedon remained the best performer with a 15% climb. Ibstock was up 7.6%.
The building products retailer cut its final dividend by 31% to 2.5 pence per share, with the full-year dividend cut 43% to 4.0p, and said pretax profit in 2024 declined 30% to GBP20.7 million.
However, it said market demand improved throughout the year with sales to date "ahead of the comparative period", adding that it "expects to make good progress in 2025".
Balfour Beatty continued to lead the laggers, down 4.0% following the news that CEO Leo Quinn will step down later this year after more than a decade leading the infrastructure firm.
On AIM, Oriole Resources rose 7.7%.
The West and Central Africa-focused firm said results from its ongoing maiden diamond drilling programme at its 90% owned Mbe gold project have delivered over 30 gold mineralised intersections.
"Not only has hole MDBB003 intersected wide zones of lower grade gold, it has also intersected a highest grade interval of 4.24m at 7.70g/t Au," noted Chief Executive Officer Martin Rosser.
Rosslyn Data lost 7.3%, despite guiding for on-year revenue growth of about 14% to around GBP3.3 million; a narrowed adjusted loss before interest, tax, depreciation and amortisation of around GBP1.7 million; and a cash balance of around GBP1.7 million at April 30, up from around GBP600,000 one year prior.
Among small-caps, Galliford Try rose 8.3%.
The construction firm reported a 54% on-year jump in pretax profit for its first half to GBP20.0 million, while revenue rose 13% to GBP923.2 million.
Galliford also hiked its interim dividend by 38% to 5.5p per share from 4.0p.
However, it also said some anticipated revenue from a "major new client" is now expected to be received in financial 2026 instead, and that timelines for converting some pipeline opportunities have elongated.
In other domestic news, the UK service sector recorded only marginal growth in February, as rising output masked the steepest decline in new work since November 2022 and the fastest pace of job shedding in over four years, survey results from S&P Global showed.
The S&P Global UK services business activity index rose slightly to 51.0 points in February from 50.8 in January, extending its run above the 50.0 neutral mark for a sixteenth consecutive month.
However, the latest reading remained well below the long-run series average of 54.3, and pointed to "only a marginal expansion in service sector output". The reading also came just below the flash estimate of 51.1 points.
The S&P Global UK composite PMI, which tracks activity across both manufacturing and services, registered 50.5 points in February, down slightly from 50.6 in January.
In European equities on Wednesday, the CAC 40 in Paris was up 1.9%, while the DAX 40 in Frankfurt was up 3.3%.
"The DAX soared...after German leaders proposed to reform the country's borrowing rules to free up investment and support the economy," Mould noted. "Energy, industrials and basic materials stocks rallied hard, with investors notably chasing companies linked to the construction sector.
"The DAX has been quite the stock market darling this year, taking many investors by surprise and putting US equities firmly in the rear-view mirror."
Germany's struggling construction industry welcomed the tentative political deal struck in Berlin to pump EUR500 billion into infrastructure spending, with leaders calling it a major opportunity for the sector.
"We expect not only economic impetus, but also a strengthening of our national competitiveness. The construction industry is pleased that the [potential government coalition partners] want to take this step," Felix Pakleppa, managing director of the Central Association of the German Construction Industry, said.
Also, data from Eurostat showed that eurozone producer prices increased on a monthly basis by 0.8% in January in both the euro area and the EU, following 0.5% and 0.4% gains respectively in December. Compared with January 2024, industrial producer prices increased by 1.8% in both geographies.
Service sector growth in the eurozone was mostly as anticipated in February, with Spain leading the growth amid an accelerated increase in business activity, data published by S&P Global showed.
The HCOB eurozone composite purchasing managers' output index remained unchanged at 50.2 in February, and in line with the flash reading on February 21.
The HCOB eurozone services PMI business activity index slowed to 50.6 in February from 51.3 in January, and underperformed ever-so-slightly against the flash reading of 50.7.
And Ireland's labour market continued to strengthen in February, data from the Central Statistics Office showed.
The seasonally adjusted unemployment rate fell to 3.9%, down from 4.0% in January and 4.2% a year earlier. The number of unemployed people dropped to 111,500, compared with 115,700 in January and 117,100 in February 2024, reflecting a monthly decline of 4,200 and an annual drop of 5,600.
The pound was quoted at USD1.2819 at midday on Wednesday in London, higher compared to USD1.2712 at the equities close on Tuesday. The euro stood at USD1.0676, higher against USD1.0525. Against the yen, the dollar was trading higher at JPY149.45 compared to JPY148.56.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.5%, the S&P 500 index up 0.6%, and the Nasdaq Composite up 0.7%.
SPI's Stephen Innes noted: "Commerce Secretary Howard Lutnick hinted that a relief pathway could be unveiled as early as Wednesday, giving markets a much-needed dose of optimism...Lutnick's carefully worded pivot didn't go unnoticed."
Innes continued: "The market is now betting on a tactical retreat from Trump—not a full tariff rollback, but a recalibration to avoid an all-out trade war. With both China and North America showing signs of willingness to negotiate, a breakthrough is still possible.
"But with Trump's penchant for last-minute curveballs, traders aren't taking anything for granted. The next headline could flip this market on its head in a heartbeat."
Still, Innes added: "Of course, part of the logic behind this sudden shift is the economic downdraft these tariffs are unleashing on US stocks. The market turmoil isn't lost on Trump, and while he thrives on brinkmanship, even he knows a collapsing S&P 500 isn't great optics."
Brent oil was quoted lower at USD70.14 a barrel at midday in London on Wednesday from USD70.29 late Tuesday.
Gold was quoted higher at USD2,913.53 an ounce against USD2,908.04.
Still to come on Wednesday's economic calendar, there are multiple US releases including composite PMI, the ISM services PMI, and total vehicle sales.
By Emma Curzon, Alliance News reporter
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