LONDON MARKET MIDDAY: Buoyant Mood Ahead Of Biden Inauguration In US

(Alliance News) - Markets were splashed in green on Wednesday ahead of US President-elect Joe Biden's swearing in, though a weaker dollar meant the blue-chip FTSE 100's performance lagged that of continental peers.

"European markets are preparing looking forward with optimism this morning, with Joe Biden's inauguration marking the end of a four-year period that married up both Brexit and global trade uncertainty," said Joshua Mahony, senior market analyst at IG.

Biden's inauguration ceremony will start at 1530 GMT on Wednesday with Biden and incoming vice president Kamala Harris sworn into office at 1700 GMT.

The FTSE 100 index was up just 1.21 points at 6,714.16 midday Wednesday. The mid-cap FTSE 250 index climbed 201.28 points, or 1.0%, to 20,804.17. The AIM All-Share index was up 0.3% at 1,184.16.

The Cboe UK 100 index was flat at 667.92. The Cboe 250 was up up 1.1% at 18074.92, and the Cboe Small Companies up 0.5% at 12393.30.

In mainland Europe, the CAC 40 in Paris was up 0.5% while the DAX 30 in Frankfurt was 0.6% higher Wednesday afternoon.

While stocks gained ahead of Biden's move into the White House, the FTSE 100's rise was constrained by a stronger pound.

Sterling was quoted at USD1.3689 at midday, advancing from USD1.3616 at the London equities close on Tuesday as the dollar weakened amid Wednesday's risk-on mood. The pound was aided as UK inflation beat expectations for December.

UK consumer prices rose 0.6% year-on-year in December, double the 0.3% rate seen in November. On a monthly basis, prices rose 0.3% in December, rebounding from November's 0.1% decline.

Annually, consensus had expected the inflation rate to come in at 0.5% and the monthly reading at 0.2%, according to FXStreet, with the figures beating forecasts on both counts.

"Looking ahead, we expect CPI inflation to hover between 0.5% and 0.8% in Q1, before leaping to 1.5% in April, when Ofgem likely will increase its default tariff cap for electricity and natural gas prices, and the anniversary of last year's slump in oil prices will be met," commented Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Eurozone inflation, meanwhile, met market forecasts for December. According to Eurostat, consumer prices in the euro area fell 0.3% annually in December, in line with market forecasts and November's decline. It was the fourth successive month of a 0.3% annual price slip.

The euro traded at USD1.2115 in the wake of the inflation reading, soft from USD1.2127 late Tuesday.

Against the yen, the dollar was quoted at JPY103.81, down from JPY103.91.

Gold was quoted at USD1,851.40 an ounce on Wednesday, higher than USD1,839.70 on Tuesday as the dollar fell. Brent oil was trading at USD56.31 a barrel, up from USD55.93 late Tuesday.

In New York, stocks are called for an upbeat start ahead of Biden's inauguration. The Dow Jones Industrial Average was called up 0.3%, the S&P 500 up 0.4% and the Nasdaq Composite up 0.8%.

Biden plans to kick off his new administration Wednesday with orders to restore the US to the Paris climate accord and the World Health Organization, aides said.

Biden will sign 17 orders and actions hours after being sworn in as US leader to break from policies of departing President Donald Trump and set new paths on immigration, the environment, fighting Covid-19 and the economy, they said.

In first-day moves, he will end Trump's much-assailed ban on visitors from several majority-Muslim countries and halt construction of the wall that Trump ordered on the US-Mexico border to stem illegal immigration.

He will also set a mask mandate on federal properties to stem the spread of Covid-19; restore protections of nature reserves removed by Trump; and seek freezes on evictions and protection for millions behind on their mortgages due to the coronavirus pandemic.

IG's Mahony commented: "The actions seen in Washington last week highlight a nation more polarised than ever. The question for markets is just how that political division translates into Congress, with Biden hoping that Democrats will vote along party lines to help him push through a raft of grandiose spending packages."

The Democrats have a majority in the House of Representatives but only half the seats in the Senate, with VP Harris having a tie-breaker vote. Therefore, a single defector among the Senate Democrats could halt legislation.

In London, Pearson rallied to the top of the FTSE 100 as it guided to profit and sales for 2020 in line with expectations. The stock was trading 7.2% higher at midday.

For the year, the FTSE 100 education publisher's sales declined by 10% year-on-year, with the only positive performance coming from the group's Global Online Learning business. Pearson expects adjusted operating profit to be between GBP310 million and GBP315 million, a 46% to 47% drop from GBP581 million a year before.

"While full-year numbers make for unpleasant reading, the fourth quarter continued a trend of steady improvement. Online learning resources continue to perform well and pent up demand for Pearson test centres have also provided a welcome boost," commented Nicholas Hyett, equity analyst at Hargreaves Lansdown.

Burberry shares trimmed early gains to trade just 1.8% higher at midday. The luxury fashion house said Wednesday its full price sales recovered during the festive period, helped by growth in mainland China, though trading in Europe continued to be hurt by Covid-19 restrictions.

At the bottom of the FTSE 100 was Standard Chartered, falling 3.2% after Citigroup cut the emerging markets-focused bank to Neutral from Buy. Other blue-chip lenders were in the red, with Lloyds Group down 1.9%, HSBC down 1.4% and Barclays down 1.3%.

In the FTSE 250, WH Smith shares climbed 8.9% as it reported a Christmas trading period ahead of management expectations.

For the month of December, revenue from the books and stationery retailer's High Street business reached 92% of the prior year's levels, while Travel revenue stood at 36%, leading to total group revenue achieving 67% of the 2019 financial year's figure for the month.

For the 20 weeks ended January 16, WH Smith's High Street business reported a strong recovery, achieving 87% of revenue reported for the same period the year before, with robust trading from both the group's seasonal and "work from home" ranges, leading to a Christmas exit with a clean stock position.

Pub operator JD Wetherspoon rose 4.4% after raising almost GBP94 million in a share placing, the top end of the range it had announced after the London market close on Tuesday.

Wetherspoon said the fresh cash will help the pub chain weather the storm brought about by stringent UK lockdown restrictions.

Wetherspoon had proposed raising between GBP92.1 million and GBP93.7 million through the issue of around 8.4 million placing shares at a price between 1,100 pence and 1,120p per placing share. On Wednesday, Wetherspoon confirmed that it has placed 8.4 million new shares at 1,120p, raising GBP93.7 million. Existing shareholder Columbia Threadneedle Investments took 1.0 million of the placing shares, contributing GBP11.2 million toward the total.

Shares in Dixons Carphone slipped 3.4%. The retailer said its electricals sales jumped more than 10% over the festive period, helped by online growth, as locked down consumers splashed the cash for gaming, television and food preparation products.

In the 10 weeks to January 9, Dixons said like-for-like revenue in its electricals arm rose 11% year-on-year. The best growth was seen in "large screen TVs, smart tech, food preparation, health & beauty and all areas of computing & gaming," Dixons said.

Looking ahead, the company expects annual profit to be in line with market expectations.

By Lucy Heming; lucyheming@alliancenews.com

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