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(Alliance News) - Stocks in London ended mostly higher on Wednesday ahead of the US Federal Reserve's interest rate decision at 1900 BST, as expectations for an earlier withdrawal of its quantitative easing become more prevalent.
US central bankers opened their two-day policy meeting on Tuesday, having committed to keeping stimulus in place until the economy fully recovers from the ravages of the Covid-19 pandemic.
The Fed slashed the benchmark lending rate to zero in the early days of the crisis in March 2020, and then started pumping cash into the economy - which, combined with massive federal rescue spending, was credited with preventing a worse downturn.
But even with growing signs that the reopening economy is boosting employment and prices, Fed Chair Jerome Powell has remained adamant that the policy-setting Federal Open Market Committee will not raise rates or pull back its liquidity measures for some time.
Powell is expected to repeat his mantra that borrowing costs will be kept at record lows until unemployment has been tamed and inflation is consistently "running hot".
Still, many feel the central bank may not be able to stick to that directive if prices continue to surge as the economy reopens.
The FTSE 100 index closed up 18.70 points, or 0.3%, at 6,963.67. The FTSE 250 ended up 6.74 points, at 22,439.82. The AIM All-Share closed down 2.58 points. or 0.2%, at 1,274.01.
The Cboe UK 100 ended up 0.5% at 693.30, the Cboe UK 250 closed down 0.1% at 20,045.70, and the Cboe Small Companies ended up 0.1% at 14,435.80.
In Paris the CAC 40 ended up 0.3%, while the DAX 30 in Frankfurt ended up 0.6%.
"It has been a very quiet week so far for markets overall, some volatility in individual names notwithstanding, and it is not surprising that investors continue to search for a catalyst to drive volatility in the short-term. It is far from clear that the FOMC will provide that spark however, with most investors still expecting the Fed to remain silent over any change in policy until later in the year when, it is hoped, the picture of a strong recovery bolstered by stimulus plans will be more advanced," said IG Group's Josh Mahony.
In the FTSE 100, WPP ended the best performer, up 4.3%, after the ad agency reinstated 2021 guidance after kicking off the year by sealing deals with vodka maker Absolut and bankers JPMorgan Chase.
In the first quarter of 2021, revenue rose 1.8% annually to GBP2.90 billion. On a like-for-like basis, the advertising company's first quarter revenue was 6.3% higher. Revenue less pass-through costs was 1.4% lower at GBP2.33 billion, but rose 3.1% like-for-like.
Lloyds Banking Group closed up 3.5% after the high street bank delivered a surge in first-quarter earnings, in Chief Executive Antonio Horta-Osorio's swansong.
Pretax profit for the three months to the end of March multiplied to GBP1.90 billion from just GBP74 million a year ago, aided by a net impairment credit of GBP323 million, versus a charge of GBP1.43 billion a year ago.
Given the "solid performance" in the first quarter of 2021, Lloyds enhanced its guidance for 2020. Its net interest margin is now expected to be in excess of 245 basis points, after posting 249 basis points for the first quarter, and operating costs to be reduced to GBP7.5 billion.
The results were the last under Horta-Osoria, who led the bank back out of partial state ownership and departs at the end of this month to chair Credit Suisse.
London Stock Exchange Group ended 1.1% higher after the exchange operator reported a good performance in the first quarter as it achieved first cost synergies from recently acquired Refinitiv.
LSEG said first quarter total income was up 3.9%, with good growth in Data & Analytics and Capital Markets. The acquisition of Refinitiv was completed at the end of January, and integration is going to plan with around GBP40 million of cost synergies already realised on a run-rate basis and new products arising from the combination now launched.
The sale of Borsa Italiana is progressing well, LSEG added, and is expected to complete "shortly" this quarter.
At the other end of the large-caps, Fresnillo ended the worst performer, down 4.1% after the precious metals miner affirmed its annual output forecast after a slightly mixed first quarter.
Gold output in the first quarter of 2021 rose 16% annually to 228,193 ounces. This represented a 5.9% quarter-on-quarter hike from 215,581 ounces in the fourth quarter of 2020. Total silver output, however, fell 4.5% annually to 12.6 million ounces from 13.2 million and 2.4% on a quarterly basis from 13.0 million.
For 2021, Fresnillo left its outlook unchanged. Attributable gold production is expected to be in the range of 675,000 to 725,000 ounces. Attributable silver output, including Silverstream, is expected between 53.5 million and 59.5 million ounces.
Reckitt Benckiser ended the second-worst performer, down 3.9%. The household goods firm reported like-for-like revenue growth in the first quarter, leaving its full-year guidance unchanged. Total net revenue for the first quarter of 2021 grew 4.1% on a like-for-like basis, though fell 1.1% on a reported basis.
J Sainsbury closed 2.9% lower after the supermarket chain revealed an annual loss as it shouldered nearly GBP500 million in Covid-19 related costs.
Sainsbury's reported a 0.2% rise in revenue for the financial year that ended March 6 to GBP29.04 billion, from GBP28.99 billion the year before, but swung to a pretax loss of GBP261 million from the prior year's GBP255 million profit. Underlying pretax profit of GBP356 million, down 39% on the year before, was hit by GBP485 million of direct Covid-19 costs, offsetting a strong sales performance excluding fuel.
Grocery sales were up 7.8%, general merchandise sales up 8.3%, and digital sales doubled. Fuel sales dropped by 39%, however, and Financial Services sales by 24%. Fuel sales were hurt by reduced demand during lockdown and the impact of lower crude oil prices on the petrol sales price. The underlying profit figure was, however, ahead of market consensus at GBP338 million.
The grocer will pay a total dividend for the year of 10.6 pence, in line with the year before.
GlaxoSmithKline ended flat after the drugmaker said its first quarter results are in line with expectations and has reconfirmed its 2021 and 2022 guidance.
The Brentford, England-based company reported revenue in the first quarter was down 18% year-on-year to GBP7.41 billion and down 15% at constant currency.
GSK's operating profit in the first quarter was down 16% year-on-year to GBP1.68 billion and down 8% at constant currency. The company said these decreases were a result of stocking and pandemic disruption, reflecting the expected year-on year impact from Covid-19.
GSK declared a 19 pence dividend payout for the first quarter and is continuing to expect an 80p per share dividend for 2021.
In the FTSE 250, Grafton Group ended the best performer, up 12%, after the Irish building materials firm said its revenue for 2021 has risen by almost a third in the first quarter, boosted by a strong performance in the Retailing arm.
At the other end of the midcaps, Travis Perkins ended the worst performer, down 12%, after the builders' merchant said it completed the demerger of its DIY retailing business, with Wickes Group making its London Main Market debut.
Wickes shares closed at 273p each in London on Wednesday, valuing the company at GBP688.4 million.
The pound was quoted at USD1.3912 at the London equities close, marginally lower from USD1.3915 at the close Tuesday, with some analysts pointing to political issues at the heart of the UK government as a stumbling block.
UK Prime Minister Boris Johnson insisted he has not broken any laws over the refurbishment of his Downing Street flat after the Electoral Commission launched a formal investigation. The watchdog said there are "reasonable grounds" to suspect an offence may have occurred, dramatically deepening the PM's troubles over the renovations.
Shortly after the commission's announcement, Johnson told Prime Minister's Questions he "personally" paid for the renovations, but refused to answer whether he received an initial loan from the Tory party.
Questions have been mounting since former aide Dominic Cummings accused Johnson of wanting donors to "secretly pay" for the renovations to his No 11 residence in a "possibly illegal" move.
Labour leader Keir Starmer pressed the PM on whether he believes any "rules or laws have been broken" over the refurbishment of the flat.
"No, I don't," Johnson replied, adding that he has "met the requirements that I have been obliged to meet in full".
In addition, during the exchange in the Commons, Johnson was forced to deny claims that he said he would rather see "bodies pile high" than impose a third coronavirus lockdown.
Labour has accused Johnson of having "lied" over the funding, and accused senior members of the government of a possible "cover-up" as ministers battled a series of "sleaze" allegations.
Analysts at OFX commented: "UK prime minister, Boris Johnson's political troubles dominated proceedings around the pound yesterday. Johnson did no favours for the pound with his 'let the bodies pile high' comment and some are predicting this latest scandal will hinder the government's efforts to push the UK economy further despite the solid vaccination campaign so far. On the whole though the pound has been relatively insensitive to the political noise within the UK with it remaining supported against both the EUR and the US dollar this week.
"The pound is taking most of its direction this week from other currencies, and the Federal Reserve's meeting today could result in GBPUSD making a renewed drive for the 1.40 psychological level."
The euro stood at USD1.2100 at the European equities close, rising from USD1.2085 late Tuesday. Against the yen, the dollar was trading at JPY108.85, up from JPY108.50.
Stocks in New York were mostly lower at the London equities close, eyes on the Federal Reserve's policy update and US President Joe Biden, who is expected to unveil a huge spending plan.
The DJIA was down 0.3%, the S&P 500 index up 0.2% and the Nasdaq Composite down 0.2%.
Biden is set to call for a reversal of his predecessor Donald Trump's tax cuts for the wealthy to pay for a huge middle class families spending programme, senior administration officials said.
Biden will use his speech to a joint session of Congress to unveil the USD1.8 trillion American Families Plan, funded by ending Trump's tax cuts and closing loopholes used by the most wealthy to escape paying their share, they added.
On the corporate front, Boeing fell 3.4% after the aerospace firm burning through more cash than forecast in the opening quarter for a sixth straight quarter in the red.
Brent oil was quoted at USD67.65 a barrel at the equities close, up sharply from USD66.11 at the close Tuesday.
Gold was quoted at USD1,772.08 an ounce at the London equities close, lower against USD1,780.50 late Tuesday, after OPEC and its oil-producing allies, including Russia, said they would stick to an agreement for progressive production increases over three months from May.
The economic events calendar on Thursday has Germany unemployment and inflation readings at 0855 BST and 1330 BST respectively. There are also US economic growth an jobless claims figures at 1339 BST. In addition, financial markets in Japan will be closed Thursday for the Showa Day holiday.
The UK corporate calendar on Thursday has first-quarter results from oil major Royal Dutch Shell, Asia-focused bank Standard Chartered, fund manager Schroders, state-backed lender NatWest Group and from Paddy Power owner Flutter Entertainment.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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