LONDON MARKET MIDDAY: FTSE 100 up as investors shake off US CPI nerves

Tue, 12th Dec 2023 11:55

(Alliance News) - The FTSE 100 in London were higher at midday Tuesday, despite investors cautiously eyeing a trio of interest rate decisions, as well as a US inflation reading on Tuesday afternoon.

In London, shares in investment platforms suffered losses, after the Financial Conduct Authority issued a warning over interest rates.

The FTSE 100 index was up 39.53 points, 0.5%, at 7,584.42. The FTSE 250 was down 4.61 points at 18,745.78, and the AIM All-Share was down 1.56 points, 0.2%, at 723.77.

The Cboe UK 100 was up 0.4% at 756.98, the Cboe UK 250 was down 0.1% at 16,247.49, and the Cboe Small Companies was up 0.4% at 14,059.04.

In European equities on Tuesday, the CAC 40 in Paris was up 0.1%, while the DAX 40 in Frankfurt was down 0.2%.

The Paris stock market struck a record-high Tuesday as traders awaited a bumper round of economic events. It hit 7,582.47 points Tuesday, beating the record peak struck in April.

On Wednesday, markets will be eyeing an interest rate decision from the US Federal Reserve, while the European Central Bank and the Bank of England will make their own decisions on Thursday. They are all expected to leave interest rates unchanged.

"It's a big day for clues as to how central banks might act at their next interest rate decision," said Danni Hewson, head of financial analysis at AJ Bell.

Ahead of the interest rate decisions, US consumer price figures will be released on Tuesday afternoon by the Bureau of Labor Statistics.

According to FXStreet market consensus, the consumer price index is expected to rise by 3.1% annually in November, decelerating from 3.2% in October.

If CPI does decelerate, the rate of inflation will move closer to the Fed's 2% target.

Stocks in New York were called higher ahead of the reading. The Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite are all called up 0.1%.

Already on Tuesday, investors have been digesting unemployment data and the latest Zew survey on Tuesday.

Figures from the Office for National Statistics showed that UK unemployment was steady at 4.2% in the three months to October. The unemployment rate came in line with FXStreet-cited market consensus.

Economic sentiment improved in Germany in December, results from a survey showed.

According to the latest findings from Zew, the economic sentiment tracker in Germany rose to positive 12.8 points in December from 9.8 points in November.

The assessment of the economic situation in Germany has also slightly improved. The indicator rose by 2.7 points and stands at minus 77.1 points.

"Despite the current budget crisis, the assessment of the situation and economic expectations for Germany have once again slightly improved. This is due to the fact that the share of respondents expecting interest rate cuts by the [European Central Bank] in the medium term has doubled. This, in turn, is good news for the German construction industry, for which we observe significantly more optimistic expectations this month," Zew President Achim Wambach commented.

The pound was quoted at USD1.2573 at midday on Tuesday in London, up compared to USD1.2545 at the equities close on Monday. The euro stood at USD1.0803, higher against USD1.0746. Against the yen, the dollar was trading at JPY145.34, lower compared to JPY146.52.

In London, shares in London-listed investment platforms suffered losses, after the UK Financial Conduct Authority set out concerns on the treatment of retained interest on customers' cash balances.

Hargreaves Lansdown dropped 7.2%, AJ Bell fell 9.0%, and abrdn, which owns interactive investor, was down 4.6%.

The UK financial watchdog noted that the amount of interest earned by some investment platforms and self-invested personal pensions operators has increased in line with rising interest rates.

It found that the majority of 42 firms surveyed retain some of the interest earned on these cash balances, which "may not reasonably reflect the cost to firms of managing the cash".

Many also charge a fee to customers for the cash they hold, known as "double dipping", the FCA said.

The FCA said it is concerned that these practices may not be providing fair value to customers and "may not be understood by consumers or properly disclosed".

Elsewhere in the FTSE 100, Rio Tinto rose 2.8%. JPMorgan upped the stock to 'overweight' from 'neutral'.

Meanwhile, in the FTSE 250, Quilter lost 3.2%, after Bank of America cut the stock to 'underperform' from 'neutral'.

Spectris rose 2.4%, after it announced a GBP150 million buyback and portfolio sale on Monday.

The supplier of high-tech instruments, test equipment and software for industrial applications said it has sold Red Lion Controls for USD345 million.

Spectris said this sale completes its portfolio rationalisation programme, which has generated total proceeds of GBP1.2 billion.

"Spectris CEO Andrew Heath, has an excellent record, in our view, of selling businesses at high multiples," analysts at Shore Capital Markets commented, drawing attention to the April 2022 disposal of Omega Engineering for GBP300 million.

Amongst London's small-caps, Headlam lost 5.1%.

The floor coverings distributor said it expects 2023 results to be broadly in line with expectations, based on trading patterns observed to date.

However, it warned that the market in September and October was "weaker than expected", reflecting the impact of the cost-of-living crisis on the residential repair, maintenance and improvement market, as consumers cut back spending on home improvement projects.

On AIM, SmartSpace shares more than doubled to 68.19 pence.

The surge in share prices follows Skedda proposing to buy the Bury St Edmunds, England-based designer and builder of smart software solutions. It has offered the company 82p per share, more than double the closing price of 33.5p on Monday. The offer values SmartSpace at GBP25.0 million.

Skedda commented: "Skedda is excited by a potential of a combination with SmartSpace. Skedda believes that it can provide SmartSpace with the considerable financial support and technical expertise that Skedda believes will be necessary for SmartSpace to maintain its technological advantage in a rapidly developing and increasingly competitive sector."

Brent oil was quoted at USD76.13 a barrel at midday in London on Tuesday, up from USD75.41 late Monday. Gold was quoted at USD1,987.05 an ounce, up against USD1,981.92.

By Sophie Rose, Alliance News senior reporter

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