LONDON MARKET CLOSE: Europe advances, Wall Street wavers ahead of Fed

(Alliance News) - A raft of upbeat earnings prints lifted stock prices in London on Wednesday, while the mood on Wall Street was more muted heading into the Federal Reserve's US interest rate decision.

"While it is no secret that some on the FOMC see the need for it to start sooner rather than later, recent economic data has been mixed at best, along with higher prices and supply chain disruption. It will also be interesting to see if any other FOMC members have moved towards the Bullard, Bostic camp on the prospect of a rate rise next year," said Michael Hewson, chief market analyst at CMC Markets.

The Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1900 BST. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 BST.

The FTSE 100 index closed up 20.55 points, or 0.3%, at 7,016.6. The FTSE 250 ended up 129.44 points, or 0.6%, at 23,006.45, and the AIM All-Share closed up 10.66 points, or 0.9%, at 1,241.77

The Cboe UK 100 ended up 0.3% at 698.97, the Cboe UK 250 closed up 0.7% at 20,792.79, and the Cboe Small Companies ended up 0.2% at 15,199.33.

"It's been a much more positive session for markets in Europe today, boosted by some decent earnings reports across a range of sectors," said CMC's Hewson.

Topping the FTSE 100 was Fresnillo on the back of production figures, shares jumping 7.0% after the precious metals miner reaffirmed its annual outlook after substantial improvements in its silver output during the second quarter.

Total silver output rose 9.6% annually and 18% from the preceding quarter to 14.9 million ounces. Gold production rose 8.6% year-on-year to 200,200 ounces but fell 12% from the first quarter.

Fresnillo confirmed it was on track to meet its 2021 guidance of between 675,000 and 725,000 ounces of gold and between 53.5 million to 59.5 million ounces of silver.

Another gainer was St James's Place, rising 5.6% as the wealth manager posted an interim profit. The company swung to a pretax profit of GBP482.6 million for the six months that ended June 30, from a GBP71.9 million loss a year earlier.

Funds under management climbed 11% to a record GBP143.77 billion on June 30 from GBP129.34 billion at the end of last year. After a "strong start" to July, the company said it expects gross inflow growth of around 20% in the second half, despite strengthening comparatives in the latter part of the year.

Barclays shares increased 2.0% as the lender kicked off the UK banking reporting season with a sharp profit hike, boosted by a release of credit impairment provisions.

Barclays also announced plans for a GBP500 million buyback, adding to the GBP700 million it returned to shareholders through a share repurchase programme it completed in April.

Pretax profit in the six months to June 30 more than tripled to GBP4.98 billion from GBP1.27 billion a year earlier. The bank benefited from a GBP742 million credit impairment release, compared to a charge of GBP3.74 billion a year earlier.

Outside of corporate updates, travel stocks rallied on plans for England to let fully vaccinated US and EU travellers skip the need to quarantine.

UK Transport Secretary Grant Shapps announced that the new rules will be in place from 4am on Monday August 2. It has not been announced whether the change will apply to people arriving in Scotland, Wales and Northern Ireland.

Currently, only travellers who have received two doses of a vaccine in the UK are permitted to enter from an amber country – such as the US and most of the EU – without self-isolating for 10 days, except those returning from France. But ministers have decided to extend the exemption to those vaccinated in the US and the EU.

British Airways parent International Consolidated Airlines rose 3.8% and jet engine maker Rolls-Royce rose 3.5%. In the FTSE 250, Wizz Air surged 8.0% and easyJet advanced 4.6%.

Tugging at the bottom of the FTSE 250 was RHI Magnesita, falling 12% as it noted supply chain challenges.

Pretax profit for the six months ended June 30 was EUR124.6 million, a rise of 77% year-on-year from EUR70.2 million. The Vienna-based company posted revenue of EUR1.2 billion, up 2.5% from EUR1.17 billion.

Material global supply chain challenges in the first half resulted in significant delays and higher freight costs, the firm said.

In European equities on Wednesday, the CAC 40 in Paris surged 1.2%, while the DAX 30 in Frankfurt ended up 0.3%.

Paris's CAC index was bolstered as information technology services and consulting company Capgemini rose 3.9% on a 42% jump in interim net profit, while shares in luxury goods company Kering rallied 3.5% as half-year net income rose more than fivefold to EUR1.48 billion.

Stocks in New York were mixed at the London equities close, with the Dow Jones down 0.1%, the S&P 500 index up 0.1%, and the tech-heavy Nasdaq Composite up 0.6%.

Boosting the Nasdaq was Alphabet, which rose 3.9% as second quarter net income rocketed to USD18.53 billion from USD6.96 billion a year ago. Revenue surged 62% to USD61.88 billion from USD38.30 billion.

Overall though, Wall Street was muted as investors look ahead to Wednesday's US interest rate decision.

"The week's headline event is almost upon us and stock markets are waiting anxiously for the outcome, with the Fed decision just hours away," said Craig Erlam, senior market analyst at Oanda.

He added: "Given how the data is performing - talk of peak recovery - the believed transitory nature of the inflation numbers and the surge in Covid cases as the next wave takes hold, it seems highly likely that the Fed is going to kick the can down the road."

The dollar was on the ascent ahead of the Fed decision.

The pound was quoted at USD1.3881 at the London equities close Wednesday, flat compared to USD1.3882 at the close on Tuesday. The euro stood at USD1.1807 at the European equities close Wednesday, down against USD1.1834 at the same time on Tuesday. Against the yen, the dollar strengthened to JPY110.09 compared to JPY109.66.

Gold was soft, quoted at USD1,800.47 an ounce at the London equities close Wednesday against USD1,802.67 at the close on Tuesday. A barrel of Brent oil was changing hands at USD74.62, firm on USD74.58 late Tuesday.

As the week's earnings deluge continues, Thursday sees earnings from pharmaceutical firm and Covid-19 vaccine maker AstraZeneca, miner Anglo American, contract caterer Compass, Smirnoff vodka maker Diageo, lender Lloyds Banking, oil major Royal Dutch Shell and medical technology firm Smith & Nephew.

Thursday's economic calendar has eurozone consumer confidence at 1000 BST and German inflation at 1300 BST, followed by US initial jobless claims and a GDP reading at 1330 BST.

By Lucy Heming; lucyheming@alliancenews.com

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