LONDON MARKET MIDDAY: NY Seen Up As Fed Decision Week Gets Underway

LONDON (Alliance News) - UK stocks were mostly flat midday Monday, while Wall Street was called for a slightly positive open, with investors focusing on the Federal Reserve's two-day policy meeting concluding on Thursday as expectations for a US interest rate hike remained finely balanced.

The FTSE 100 index traded up 0.2% at 6,131.61, the FTSE 250 was flat at 16,974.03, and the AIM All-Share was flat at 733.59. In Europe, the CAC 40 index in Paris was up 0.3% and the DAX 30 in Frankfurt was up 0.4%.

US stock futures pointed to a higher open, with the Dow Jones Industrial Average seen up 0.2%, and the S&P 500 and the Nasdaq 100 both pointed up 0.3%. Wall Street closed higher Friday, with the Dow up 0.6% and the S&P 500 and the Nasdaq Composite both up 0.5%.

The Federal Open Market Committee will hold a crucial two-day monetary policy later this week, following which some market commentators believe it will announce the first US rate hike since 2006. But expectations are finely balanced going into the week, and the event is likely to heighten uncertainty in the market.

IG market analyst Joshua Mahony said a rate hike on Thursday is unlikely "given the sheer size of moving parts including a mid-selloff stock market, a waning Chinese economy, and multi-year lows in oil with an associated impact upon [US] inflation, jobs and [economic] growth."

But the analyst noted that, with the markets factoring in a 28% chance of some sort of rate hike, there is enough backing to induce major volatility come Thursday.

"The question is whether a decision not to hike will even be enough to lift global indices out of the current negative mindset that has dominated the past five months," said Mahony.

Most of the negative sentiment in the past months has been caused by concerns about the Chinese economy and the resulting sell off in Asian stock markets. On Monday, the Nikkei 225 in Tokyo closed down 1.6%, while China's major stock indices ended mixed, with the Shanghai Composite down 2.7% and the Hang Seng index in Hong Kong up 0.3%.

There were mixed economic data from the Asian giant on Sunday. Chinese industrial production was up by 6.1% year-on-year in August, according to the country's National Bureau of Statistics. This was marginally better than the 6.0% growth reported in July, but below expectations of 6.4%.

In addition, fixed-asset investment in non-rural areas of the country rose by 10.9% in the first eight months of the year, but this was below expectations of 11.1% growth and slower than the 11.2% increase measured for the first seven months.

However, retail sales in China grew 10.8% year-on-year in August, beating the 10.5% consensus and July reading.

On the London Stock Exchange, ARM Holdings was the best performer in the FTSE 100, up 2.6%.

Accendo Markets head of research Mike van Dulken said that shares in the chip designer were benefiting from some positive reviews released over the weekend of Apple's latest product launches and updates, including to the iPhone and iPad, announced at an event last Wednesday. The California-based tech giant is one of the most important customers for ARM.

Miners were pushing higher in London on Monday despite the continued worries about the Chinese economy, as expectations of further stimulus by Chinese authorities are thought to be again on the table.

Rio Tinto, up 2.2%, BHP Billiton, up 2.0%, Fresnillo, up 1.7%, Randgold Resources, up 1.4%, were among the best blue-chip performers. BHP was upgraded to Buy from Hold by Jefferies.

In the red was Glencore, down 1.7% after the multi-commodities miner said the board of the company behind the Katanga mine in the Democratic Republic of Congo, in which it holds 74%, has confirmed it will suspend copper and cobalt production at the site for 18 months. Glencore had flagged the decision last week when it announced plans to improve its financial condition.

Outside miners, RELX was up 1.0% after being upgraded to Outperform from Underperform by Exane BNP.

AstraZeneca also benefited from an broker upgrade, rising 1.3% as Deutsche Bank raised its recommendation on the stock to Buy from Hold. The bank said it was confident the company will be able to return to strong growth, with analyst Richard Parkes saying this will be driven by execution on its strategy for its growth platforms - diabetes, respiratory, Japan, emerging markets, and heart drug Brilinta - and delivery on its significantly improved pipeline.

In the FTSE 250, fund managers Henderson Group, up 2.6%, and Man Group, up 1.6%, were were in favour after Exane BNP initiated them both at Outperform.

In AIM, Motive Television was up 30%. The company said it plans to make its TabletTV product available on Apple's recently announced new Apple TV platform. TabletTV allows users to watch and record free-over-the air television without a contract or subscription. Motive Television is a registered Apple developer.

Meanwhile, HaiKe Chemical Group was down 40%. The China-based specialty chemicals company said its first half trading was in line with its expectations but said it has taken a hit so far in the second six months from the turbulence in the Chinese economy. The group said it is "at risk" of failing to achieve a full-year profit and said it recorded losses in both July and August due to the tough economic conditions.

By Daniel Ruiz; danielruiz@alliancenews.com

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