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(Alliance News) - Stock prices in London opened slightly higher on Wednesday, in cautious trade ahead of a Federal Reserve interest rate decision and key US corporate earnings later.
The FTSE 100 index added 4.45 points, 0.1%, at 8,538.32. The FTSE 250 was up 37.56 points, 0.2%, at 20,626.07, and the AIM All-Share added 0.38 of a point, 0.1%, at 715.70.
The Cboe UK 100 was flat at 855.93, the Cboe UK 250 rose 0.2% at 18,047.75, and the Cboe Small Companies was down 0.2% at 16,005.37.
In Frankfurt, the DAX 40 rose 0.4% in early trade, while the CAC 40 fell 0.4%.
The pound was quoted at USD1.2443 on Wednesday morning, up from USD1.2432 at the time of the London equities close on Tuesday. The euro advanced slightly to USD1.0428 from USD1.0424. Versus the yen, the dollar faded to JPY155.20 from JPY155.63.
A barrel of Brent fell to USD76.63 from USD77.21. An ounce of gold fetched USD2,765.12, up from USD2,755.79.
There are interest rates decisions in Canada and the US at 1445 and 1900 GMT respectively on Wednesday.
"It is hard to foster a sense of excitement for market participants around the January FOMC meeting, given no change in rates is expected and the dot plot isn't being updated. It is also a bit of a stretch to try and come up with plausible ideas for material changes to the statement," analysts at Lloyds Bank commented.
"On the one hand, dropping reference to the prospect of any 'additional adjustments' in Fed Funds would seem unduly hawkish at this stage, but on the other Powell going as far as hinting that March is very much under consideration for a cut in his press conference would be difficult to square with the present situation too. On the political front it just makes more sense for the FOMC to take until next time at least to try and fill in the 'placeholder assumptions' on the incoming government's policies."
In December, the central bank cut the federal funds rate range by 25 basis points to 4.25%-4.50%. It had cut at the same pace in November, but had gone big in September with a 50 basis point chop to the fed funds rate. The September move followed eight successive holds.
Lloyds analysts continued: "In terms of the data, the labour market news is still solid with the latest indicator being yesterday's employment component of the consumer confidence report. That showed the 'jobs plentiful minus jobs hard to get' indicator slowing a little but still firm enough to be comparable with readings from H2 2024 and consistent only with an unemployment rate of 4.3%, just modestly above the current 4.1% level. A good deal of the press conference could be dominated by political questions given Trump's call for lower rates last week."
The Bank of Canada, meanwhile, is expected to cut rates by 25 basis points.
In Tokyo, the Nikkei 225 ended up 1.0%, while the S&P/ASX 200 in Sydney rose 0.6%. Financial markets in Shanghai and Hong Kong are closed.
In New York on Tuesday, the Dow Jones Industrial Average rose 0.3%, the S&P 500 climbed 0.9% and the Nasdaq Composite surged 2.0%.
Nvidia clawed back some of its 17% slump from the start of the week to add 8.9% on Tuesday.
Analysts at Deutsche Bank commented: "Even as most indices posted a decent advance, it was far from a universally rosy picture. For instance, 70% of stocks within S&P 500 were actually lower on the day, with the equal-weighted version of the index down -0.47% as defensive stocks underperformed. And whilst all of the Mag-7 moved higher, semiconductor stocks were still feeling the aftershocks of Monday's slump.
"Even though Nvidia bounced back +8.93%, that's still less than half of its -19.56% decline over the previous two sessions. So it's clear there are still a lot of jitters, not least given the growing comparisons being made to the dot com bubble. However, it's worth noting that when the dot com bubble began to burst from March 2000, the Nasdaq slumped by more than a third in the space of just over a month, so it was on a scale well beyond anything we've seen today. We should get plenty more on the tech side later, as there are earnings announcements from Tesla, Microsoft and Meta after the close tonight, ahead of Apple's announcement tomorrow."
In London on Wednesday, water utilities traded lower, as two industry names responded to the Ofwat final determinations. Severn Trent fell 1.6%, while United Utilities shed 0.7% and Pennon 4.6%.
United backed annual guidance and said it will push on with a "historic GBP13 billion investment" after accepting the regulatory price review.
With the final determination agreed, we are now able to progress what will be the largest investment in water and wastewater infrastructure in over 100 years, to build a stronger, greener and healthier north west," Chief Executive Officer Louise Beardmore said. "This historic GBP13 billion investment will support 30,000 jobs across the North West, bringing focused investment in skills and opportunities, supporting economic growth in our region."
United Utilities, which provides water and wastewater services in the north west of England, "can move forward and deliver the step change in performance we all want to see", the CEO added.
The firm said it "continued to deliver a strong operating performance" in the third quarter of its financial year.
"We maintain our FY25 financial guidance and remain on track to deliver net [outcome delivery incentives] rewards higher than last year's GBP34.5 million," it added.
The firm's financial year ends on March 31.
Pennon said it has accepted Ofwat's final determination for the South West Water and Sutton & East Surrey water units, launching a nearly GBP500 million equity raise to support the investment the five-year plan requires.
The water utility will "not be seeking a reference to the Competition & Markets Authority", it said, referring to the UK competition regulator.
"The final determinations support a significant uplift in investment over the K8 period to 2030," it said. Capital expenditure is to increase to a record GBP3.2 billion from an expected GBP1.9 billion for K7, the 2020-2025 period.
Pennon said it is launching a GBP490 million rights issue to aid its "balance sheet resilience". The funds will go towards "increased investment in the water businesses".
It proposed a rights issue of 185.9 million new shares at 264p each, on the basis of 13 new shares for every 20 existing shares.
Pennon also said it will revise its dividend policy. The total dividend amount of GBP129.3 million for the year which ended last March will be "rebased on a dividend per share basis". The rebased payout will grow by the CPIH rate of inflation in the UK from the current financial year, which ends on March 31, to financial 2030. CPIH is the consumer prices index including owner occupiers' housing costs.
Dowlais rose 7.9% to 73.78p. The automotive engineering firm agreed to a GBP1.16 billion takeover by American Axle & Manufacturing, a producer of driveline products and systems.
The cash and shares offer by the New York-listed is to create a "larger, diversified global manufacturer well-positioned for long-term profitable growth". Dowlais shareholders stand to receive 0.0863 of a new AAM share, as well as 42 pence in cash and up to 2.8p in the form of a Dowlais final dividend. The terms of the deal imply an 85.2p value per Dowlais share, based on AAM's closing price of USD5.82 on Tuesday. The offer price is a 25% premium to the Dowlais Tuesday closing price.
Dowlais has a market capitalisation of GBP988.2 million. The deal gives the firm a GBP1.16 billion value on a fully diluted basis. AAM is worth USD684.3 million.
"AAM and Dowlais are leading global tier-one automotive suppliers specialising in driveline and metal forming technologies for internal combustion, electric and hybrid vehicles. The combination of AAM and Dowlais will create a leading global manufacturer with the scale, product portfolio, technology and global diversification required to lead and innovate in a transitioning business environment," a statement on Wednesday said.
Dowlais was spun out of Melrose Industries in April 2023. Dowlais includes the GKN Automotive and the GKN Powder Metallurgy businesses.
Dowlais said it has cancelled a previously announced GBP50 million share buyback programme with immediate effect after agreeing the AAM deal.
Over in Paris, LVMH slumped 5.1%. The Paris-based luxury goods firm late Tuesday reported net income of EUR12.6 billion, down 17% from EUR15.2 billion a year prior, as revenue fell 1.7% to EUR84.7 billion from EUR86.2 billion.
Peers Kering and Hermes lost 7.6% and 1.0%. Burberry declined 0.7% in London, while Cartier owner Richemont was flat in Zurich.
By Eric Cunha, Alliance News news editor
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