LONDON MARKET MIDDAY: FTSE leads way as stocks rise ahead of ECB, BoE

(Alliance News) - Blue-chip equities in Europe made stellar gains on Wednesday morning, with the FTSE 100 outperforming once again, while a hot eurozone inflation figure has given central bankers something to consider ahead of a key day for monetary policy on Thursday.

Eurozone inflation accelerated in January, defying expectations of a slowdown. The European Central Bank announces its latest monetary policy decision on Thursday, as does the Bank of England.

The FTSE 100 index was up 61.52 points, or 0.8%, at 7,597.30 midday Wednesday. The mid-cap FTSE 250 index was up 236.09 points, or 1.1%, at 22,404.03. The AIM All-Share index was up 4.81 points, 0.4%, at 1,106.51.

The Cboe UK 100 index was up 1.0% at 754.17. The Cboe 250 was up 1.3% at 19,991.54, and the Cboe Small Companies was 0.1% higher at 15,525.72.

In mainland Europe, the CAC 40 stock index in Paris was up 0.4% and the DAX 40 in Frankfurt was 0.3% higher.

"European markets continue their February ascent, attempting to build on recent bullish momentum after January's rout," Interactive Investor analyst Victoria Scholar commented.

"The FTSE 100 is driving higher outperforming other bourses as the UK index inches closer to 7,600 as the next major resistance hurdle to watch."

The FTSE last closed above 7,600 in mid-January, in what was a post-pandemic high.

London's large cap index outperformed European peers on Wednesday despite a stronger pound, a headwind for a constituent list stacked with international earners.

The pound was quoted at USD1.3558 midday Wednesday, up from USD1.3505 at the London equities market close on Tuesday.

The euro stood at USD1.1311, up from USD1.1247 at the European equities close on Tuesday.

According to Eurostat, the eurozone's annual inflation accelerated to 5.1% in January from 5.0% in December. Though only quickening slightly, the figure was markedly above consensus estimates of 4.4%.

It heaps pressure on the ECB ahead of its interest rate decision on Thursday.

Stripping out these volatile items, the inflation rate was still hotter than expected. Core inflation eased to 2.3% yearly in January from 2.6% in December; however FXStreet-cited consensus forecast an even greater slowdown to 1.9%.

"Accordingly, we think that [ECB] policymakers will end net asset purchases completely this year and raise interest rates by early 2023, but a rate hike this year is increasingly likely," Capital Economics analyst Andrew Kenningham commented.

Against the yen, the dollar was trading at JPY114.38, down from JPY114.80. Away from central banks, focus is on this week's US nonfarm payrolls on Friday, as well as the precursor ADP jobs report at 1315 GMT on Wednesday.

The ADP figure is expected to show 207,000 jobs were added to the US economy in January, down markedly from December's figure of 807,000.

While seen as the forerunner to the key jobs report, the discrepancy between the ADP figure and the official nonfarms number is at times dramatic. December's nonfarm payrolls had shown just 199,000 jobs were added to the US economy, some way off the ADP figure.

Equity markets in New York were called higher on Wednesday. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 up 0.7% and the Nasdaq Composite up 1.3%.

On Nasdaq, Alphabet's A shares were 10% higher, and C shares 11% up, after the Google owner posted strong earnings and announced plans for a 20-to-1 stock split.

"Alphabet has announced its long overdue 20-for-1 stock split, potentially paving the way for its entry into the Dow Jones Industrial Average, the blue-chip index which requires companies to keep their share prices low," Interactive Investor's Victoria Scholar commented.

In London, Vodafone shares rose 2.8%. The telecommunications company posted decent third-quarter numbers, but a pledge to commit to "proactive portfolio actions" grabbed more attention and fanned M&A flames.

In the three months to December 31, revenue rose 4.3% annually to EUR11.68 billion from EUR11.20 billion a year earlier. On an organic basis, growth was 3.7%.

Service revenue, which includes airtime usage, monthly access charges and roaming, climbed 3.1% annually to EUR9.65 billion. It was up 2.7% organically. This is where Vodafone generates most of its revenue.

In January, Bloomberg reported Vodafone has "explored a potential purchase" of Three.

Vodafone Chief Executive Nick Read said on Wednesday: "We are also committed to creating value for our shareholders through proactive portfolio actions and continuing to improve returns at pace."

Ocado was the best blue-chip performer, up 7.1% after Credit Suisse lifted the grocer to Outperform from Underperform.

Playtech was one of the best mid-cap performers, shaking off an early share price fall. The stock was up 5.0% at midday. The gambling software firm said shareholders were not likely to back a takeover by Sydney-listed Aristocrat, as proxy votes held to date had not reached the minimum 75% approval threshold.

Should the vote at the general meeting, being held Wednesday morning, confirm this, the acquisition of Playtech by Aristocrat will not proceed.

Playtech has said in light of the expected shareholder vote, it is "evaluating attractive M&A proposals it has received from third parties in respect of [its] B2B and B2C businesses.".

On AIM, AFC Energy rose 12%. All-electric off-road SUV racing series, will continue to use the company's zero-emission fuel cell for its 2022 season.

The new contract, signed on Tuesday, will see the company's fuel cell system being rented to Extreme E again on commercial terms and used to generate power for all of the race vehicles at each of the five rounds in the 2022 season. The inaugural edition of the burgeoning Extreme E series featured teams founded by former Formula One world champions Lewis Hamilton and Nico Rosberg.

The construction sector was on the up on Wednesday. Kier Group was 2.5% higher, while Costain rose 1.0%. AIM-listed Filtronic, whose products are used in telecommunications infrastructure, was up 10%.

The UK government will publish its long-awaited blueprint for "levelling up" the country. The White Paper will set out a series of wide-ranging national "missions" – from improving public transport to ensuring access to 5G broadband – to be enshrined in law.

Gold was quoted at USD1,802.77 an ounce midday Wednesday, down from USD1,805.05 at the London equities close on Tuesday.

On the day of a meeting of the OPEC+ oil cartel, Brent prices were slightly weaker. Brent oil fetched USD88.84 a barrel, down from USD89.50.

By Eric Cunha; ericcunha@alliancenews.com

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