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(Alliance News) - European equities struggled for direction on Wednesday, though avoided the volatility seen in recent days, while attention was on the UK government bond market as the Bank of England prepares to pull its support.
The Bank of England confirmed Wednesday it will pull the plug on its emergency gilt buying programme on Friday, despite suggestions it might not.
Elsewhere in the central banking space, minutes from the Federal Reserve's most recent meeting are released at 1900 BST.
The FTSE 100 index was off just 2.52 points to 6,882.71 midday Wednesday. The FTSE 250 lost 101.93 points, or 0.6%, to 16,802.13 and the AIM All-Share fell 6.74 points, 0.9%, to 780.96.
The Cboe UK 100 traded down 0.1% at 687.56, the Cboe UK 250 declined 1.0% at 14,386.01, and the Cboe Small Companies fell 0.4% to 12,476.14.
In European equities on Wednesday afternoon, the CAC 40 in Paris and the DAX 40 in Frankfurt both were up 0.1%.
The pound fell to USD1.1066 midday Wednesday in London, down from USD1.1097 late Tuesday.
The pound fluctuated on Wednesday morning, spending time below the USD1.10 mark.
Amid a wild UK gilt market, there were early fears on Wednesday of a cliff-edge, with the Bank of England emergency measures due to be pulled on Friday. The pessimism gave way to optimism, and then to pessimism again as the morning progressed.
Andrew Bailey, speaking in Washington on Tuesday, said the urgent bond buying measures, introduced following market turmoil after the mini-budget last month, would end on Friday as planned.
But early Wednesday, the Financial Times reported the BoE would be open to extending the programme to avoid a cliff-edge and restore order to beleaguered pension funds which may struggle to meet margin calls.
A BoE spokesperson later Wednesday morning said the scheme will end on Friday as planned.
"The governor confirmed this position yesterday, and it has been made absolutely clear in contact with the banks at senior levels," the spokesperson said.
In its October Financial Policy Summary, the BoE said on Wednesday that while expecting market participants to be mindful of every extreme, it hopes "lessons are learned from this episode".
AJ Bell analyst Russ Mould commented: "This back and forth jostling and inconsistent messaging is becoming an unwanted trend, leaving investors scratching their heads, wondering what's going on. It may only get worse in the coming weeks leading up to [UK Chancellor] Kwasi Kwarteng's debt-cutting plan on October 31.
"In the meantime, it is clear investors are becoming more concerned about the state of the UK, particularly as the latest economic figures show a decline in GDP."
The UK economy shrank by 0.3% in August from July, following a downwardly revised 0.1% climb in July from June. Month-on-month growth in July was initially forecast at 0.2%.
August's gross domestic product was expected to have remained unchanged from July.
The euro traded at USD0.9712 midday Wednesday, down from USD0.9719 at the European equities close on Tuesday.
Against the yen, the dollar rose to JPY146.51 from JPY145.70. This means the dollar is trading around the levels seen just before the Japanese government intervened in the foreign exchange market last month.
"Investors continue to evaluate the intervention backbone of central banks and finance ministries in FX and government bond markets, with Japan and the UK sharing centre stage. For Japan, there are no clear signals of official yen buying after USDJPY rallied above the September 22 intervention level during the Asia morning session," SPI Asset Management analyst Stephen Innes commented.
In London, JD Sports was the worst blue-chip performer, down 6.4%. The sportswear retailer said Chief Financial Officer Neil Greenhalgh will step down next year. It will now start a process to recruit a successor.
The FTSE 100 listing's board as seen a lot of change of late.
Back in July of last year, JD Sports had bowed to shareholder pressure over its corporate governance, agreeing to split the chair and CEO roles. Former executive chair Peter Cowgill then left the company in May of this year.
In August, JD Sports named Regis Schultz as its new chief executive, joining from Al-Futtaim Group, a Dubai-based conglomerate where Schultz was president of retail. It had named Andrew Higginson as chair in July.
Barratt Developments dropped 5.2% as it warned private reservations are down from a year earlier, with the housebuilding sector fights rising interest rates and falling consumer confidence.
Total forward sales as of October 9 stood at 13,314 homes, down from 15,393 a year earlier. Barratt blamed this on a "slower reservation rate".
Synthomer shares tumbled 13% as it announced dividends will be suspended until the end of next year.
The chemicals company is in talks with banks to ensure "sufficient headroom for its covenants going forward". As part of a waiver process, it has suspended all dividend payments until the end of 2023, including one that is due in November.
On AIM, DeepVerge slid 38% amid financing developments of its own, with repayments of a mezzanine loan facility due to begin soon.
It has recently begun a process to raise equity to fund repayments as well as secure working capital. It said there can be no guarantee on a cash raise, however, noting its low share price.
The Dublin-based environmental and life science group said there will be no default on the loan should it miss payments up to November 14, assuming principal and interest payments are made following a proposed equity raise.
Brent oil was quoted at USD94.60 a barrel midday Wednesday, largely flat from USD94.62 at the London equities close on Tuesday. Gold traded at USD1,669.36 an ounce, down from USD1,671.20.
By Eric Cunha; ericcunha@alliancenews.com
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