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(Alliance News) - Stock prices in London were largely lower at midday on Wednesday, as in-coming interest rate decisions from the US Federal Reserve and the Bank of England weighed on investors' minds.
The FTSE 100 index was marginally higher, up 3.52 points at 7,539.74, boosted by a strong performance from banking stocks.
Meanwhile, the FTSE 250 was 67.52 points, or 0.4%, at 18,711.58, and the AIM All-Share was down 0.95 points, or 0.1%, at 804.01.
The Cboe UK 100 was flat at 754.33, the Cboe UK 250 was down 0.4% at 16,294.86, and the Cboe Small Companies was flat at 13,189.28.
The pound was quoted at USD1.2278 at midday on Wednesday in London, sharply higher compared to USD1.2192 at the close on Tuesday. The currency hit an high of USD1.2296 earlier in the day.
Sterling strengthened after inflation in the UK came in hotter than expected in February, putting pressure on the Bank of England to increase interest rates again on Thursday by at least 25 basis points.
"It had been touch and go about whether the Bank of England will raise rates but now with consumer price inflation rising to 10.4% on the month, it looks increasingly likely a hike will voted through tomorrow. Although the banking turmoil will be front of mind, this latest snapshot and ongoing worries about a tight labour market are likely to tip the balance in favour of a rate hike," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The consumer price index rose by 10.4% in February from a year before, accelerating from a 10.1% annual rise in January. Market consensus had expected UK inflation to cool to 9.8% in February, according to FXStreet.
The print remained below the recent peak of 11.1% in October, which was the highest annual inflation rate since 1981, according to the ONS.
Core annual inflation - excluding energy, food, alcohol, and tobacco - picked up to 6.2% in February from 5.8% in January. Markets had expected core inflation to remain unchanged.
The Bank of England will announce its decision at 1200 GMT on Thursday. However, before eyes turn to Threadneedle Street, the US Federal Reserve will announce its own interest rate decision at 1800 GMT tonight.
According to the CME FedWatch tool, markets believe there is a 86% chance the Federal Reserve will lift US interest rates by 25 basis points, with the remaining 14% expecting rates to stay at their current level.
The decision comes after a chaotic couple of weeks for the US banking sector, triggered by the failures of Silicon Valley Bank and Signature Bank.
AJ Bell's Mould said: "The dangers of moving too far off the course plotted before the collision with an SVB-shaped iceberg is that it could undermine market confidence and lead to the conclusion the Fed has spied more vulnerabilities in the financial sector which investors are not yet aware of.
"Central bankers have been performing a high-wire act for several months, but it feels like the tightrope is getting thinner and higher by the day."
Stocks in New York were called mostly higher ahead of the Fed's decision, with the Dow Jones Industrial Average called up 0.1%, the S&P 500 index up 0.1%, and the Nasdaq Composite seen flat.
In London, banking stocks were the best performers at midday benefiting from calming nerves around the financial sector after recent volatility.
HSBC was up 3.0%, Barclays rose 2.3%, Standard Chartered climbed 2.2%, NatWest added 1.7%, and Lloyds was 1.0% higher.
In contrast, British Land remained the FTSE 100's worst performer, down 4.1% at midday, after Goldman Sachs cut the property developer to 'sell'.
WPP rose 1.0% as it announced the acquisition of influencer marketing agency Goat for an undisclosed price.
The advertising and communications company said Goat creates data-led, end-to-end influencer marketing campaigns, driving brand engagement and integrating targeted paid media. Its clients have included Dell, Meta Platforms, Tesco, and Uber.
In the FTSE 250, Marks & Spencer jumped 4.5% following three ratings upgrades. Goldman Sachs and Exane BNP raised the grocer to 'neutral', while CitiGroup raised the firm to 'buy'.
Vistry climbed 2.5% despite reporting a drop in annual profit as it lamented more challenging market conditions in the final quarter of 2022, leading the housebuilder to slash its final dividend.
Pretax profit fell 23% to GBP247.5 million in 2022 from GBP319.5 million in 2021, as cost of sales widened to GBP2.32 billion from GBP1.97 billion year-on-year. Revenue climbed 13% to GBP2.73 billion from GBP2.40 billion.
Vistry reduced its final dividend by 20% to 32 pence per share from 40p a year before. That cut its total annual payout to 55p from 60p.
Bytes Technologies rose 2.7% after it said it delivered "strong" sales and profit growth in the financial year ended February 28, with gross profit and adjusted operating profit up 20% against the prior year.
The computer software reseller said this reflected "very strong" demand from both corporate and public sector clients, despite "well-documented" macroeconomic headwinds.
Elsewhere in London, XPS Pensions rose 6.2% after the company said it now expects revenue for the financial year ending March 31 to be ahead of current consensus.
The pension consultancy said consensus sees revenue between GBP163 million and GBP165 million. This would represent growth of 17% to 19% against the year prior.
On AIM, Anpario plunged 32% after the animal feed additive manufacturer reported a drop in annual profit amid declining demand and higher costs.
The company's pretax profit fell 35% to GBP3.7 million in 2022 from GBP5.7 million the year prior, as its gross margin worsened to 43% from 49%.
Anpario explained that it suffered from supply chain disruption and "significant and immediate" raw material and logistics price inflation during the year, which also hurt many of the farmers that are customers of the firm.
"Some farmers, particularly across the UK and Europe, decided to forgo unprofitable production which is now leading to specific food shortages in the retail channels. With less animals being reared the demand for animal feed and therefore additives is inevitably lower and partly explains the group's disappointing performance across Europe," it said.
In European equities on Wednesday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was up 0.6%.
European Central Bank President Christine Lagarde warned that recent financial turbulence could add to "downside risks" in the eurozone, while insisting policymakers remained focused on taming high inflation.
Lagarde said the latest ECB forecasts – which lowered inflation projections and raised the growth outlook for this year – did not take into account the recent upheaval.
"Those tensions have added new downside risks and have made the risk assessment blurrier," she said in a speech in Frankfurt.
The euro stood at USD1.0794, higher against USD1.0778. Against the yen, the dollar was trading at JPY132.88, higher compared to JPY132.29.
Brent oil was quoted at USD75.08 a barrel at midday in London on Wednesday, up from USD74.42 late Tuesday. Gold was quoted at USD1,941.24 an ounce, lower against USD1,943.19.
By Heather Rydings, Alliance News senior economics reporter
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