LONDON MARKET MIDDAY: Stocks Mixed As Investors Suffer Fed Hangover

LONDON (Alliance News) - The 'Santa Rally' which appeared to have come down the chimney after Wednesday's Federal Reserve interest rate hike has already burnt out, with UK-listed equities trading mostly lower midday Friday.

"There's a bit of a 'Bah Humbug' morning-after feeling around the place today. Adrenaline and a bit of euphoria kept everything going from the Fed lift-off until the open of the US equity markets yesterday but since then, it's all turned hangover-ish," said Kit Juckes, strategist at Societe Generale.

After recording strong gains on Thursday, London stock indices stalled on Friday. The FTSE 100 traded down 0.4% at 6,076.66 points, and the FTSE 250 was down 0.2% at 17,151.54, though the AIM All-Share was slightly higher at 722.33.

It was a similar story in Europe where the French CAC 40 was down 0.5% and the German DAX 30 in was down 0.2%.

US stock futures indicated a largely lower open for Wall Street. The DJIA was pointed down 0.3%, the S&P 500 down 0.2% and the Nasdaq 100 down 0.1%.

Michael Hewson, chief market analyst at CMC Markets, said the Fed rally is now in the past and concerns about the state of the global economy have returned to the front of investor's minds.

"According to a survey of economic conditions in China, carried out by a US-based independent body, modelled on the US Beige Book, the overall picture showed that the economy deteriorated in the fourth quarter. The survey pointed to 'pervasive weakness' across the board raising concerns about the effectiveness of recent attempts to stimulate a recovery in the world’s second biggest economy," Hewson said.

London also followed a negative lead from Asian markets, where stocks ended much lower following disappointment at the Bank of Japan's expanded stimulus package. The Japanese Nikkei 225 index closed down 1.9% after the Bank of Japan tweaked its bond-buying program.

While keeping its main target for monetary stimulus unchanged at an annual pace of about JPY80 trillion, the Bank of Japan expanded the quantitative easing program to include exchange traded funds.

The Hang Seng in Hong Kong closed down 0.5%, and the Shanghai Composite ended flat.

On the London Stock Exchange, miners and oil majors were providing support for the blue-chip FTSE 100 index, with Anglo American up 1.8%, BHP Billiton up 0.6% and Royal Dutch Shell 'B' shares up 0.7%. The resource stocks were rebounding from lows made Thursday in the wake of the Fed decision.

However, Connor Campbell, financial analyst at Spreadex, is uncertain about the sustainability of the commodity rebound.

"Things may become worse as the day continues, with the morning's commodity rebound looking like it may not be able to last, Brent Crude’s gradual tumble into the red (the instrument worryingly dipping below the USD37 per barrel mark) already taking with it a few of the sector's more loss-susceptible stocks," Campbell said.

Brent and West Texas Intermediate both gave up their intraday gains and slipped back below the prices at the London close on Thursday. At midday, Brent was quoted at USD36.71 a barrel, compared to USD37.19 at the London stock market close on Thursday. WTI was quoted at USD34.45 a barrel at midday.

Sports Direct International traded up 0.4% after it said founder Mike Ashley will personally oversee a review of all agency worker terms and conditions in order to ensure its employees and casual staff work in good conditions.

Ashley, who is deputy chairman and owns a 55% stake in the sporting goods retailer, is expected to begin that review in the New Year. The move comes in the wake of serious questions raised about the conditions faced by the company's workforce.

Bodycote was the best performer in the FTSE 250, up 4.0% at 561.00 pence after the specialty chemicals company was upgraded to Buy from Hold by N+1 Singer. The broker expects market sentiment towards the company to improve in 2016, following a tough 2015 for the stock. Shares in Bodycote have suffered in 2015, down by 12% year to date.

The broker cut its price target on the stock to 635p from 785p, but said it sees "double digit upside risk" to its new target.

Goodwin, down 7.2%, was one of the worst performers in the FTSE All-Share. The mechanical and refractory engineering company said only time will tell whether or not it will be able to find work to make up for the shortfall caused by the slowdown in oil, gas and mining industries, as it reported a fall in pretax profit for its first half.

For the half year to end-October, Goodwin reported a pretax profit of GBP6.0 million, more than halved from GBP13.5 million a year before, as revenue dropped to GBP61.2 million from GBP73.0 million.

ZincOx Resources was the best performer in the AIM All-Share, up 35% after it said discussions with potential investors are continuing, with the aim of securing at least USD5.0 million of funding by the end of 2015.

"There is, however, no certainty that these discussions will lead to a successful outcome," the company warned

Still ahead in the economic calendar, the flash Markit composite and services purchasing managers' index for the US is at 1445 GMT, Kansas Fed manufacturing activity is at 1600 GMT, and Jeffrey Lacker, president of the Richmond Fed, will make a speech at 1800 GMT.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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