LONDON MARKET MIDDAY: Stocks rise ahead of Powell's Senate hearing

Tue, 11th Jan 2022 12:19

(Alliance News) - Stock prices in London were higher at midday on Tuesday as investors eagerly await Congressional testimony from Federal Reserve Chair Jerome Powell.

The Fed chief will highlight the central bank's efforts to fight inflation and stabilize the US economy at his confirmation hearing, according to testimony released Monday.

However, the Republican will likely also face questions about his ethics from a Democratic senator, after a media report raised further questions over whether a Fed official had traded securities to benefit from the upheaval caused by the Covid-19 pandemic in 2020.

Powell's testimony Tuesday before the Senate Banking Committee comes after President Joe Biden nominated him for a second term leading the central bank as the US economy deals with a wave of record-high inflation that's prompted critics to accuse the Fed of complacency.

The Fed's December minutes caused a stir last week, raising the possibility of an interest rate hike in March and revealing more-aggressive-than-expected discussions over further reducing the central bank's balance sheet.

The FTSE 100 was up 37.78 points, or 0.5%, at 7,483.03. The mid-cap FTSE 250 index was up 179.03 points, or 0.8%, at 23,180.84. The AIM All-Share index was up 5.58 points, or 0.4%, at 1,175.85.

The Cboe UK 100 index was up 0.4% at 743.06. The Cboe 250 was up 0.4% at 20,653.91 and the Cboe Small Companies up 0.6% at 15,612.24.

In Paris the CAC 40 stock index was up 1.2%, while the DAX 40 in Frankfurt was 0.1% lower.

Analysts at ActivTrades said: "Stock investors are likely to pay attention to what will happen on the other side of the Atlantic with today's hearing from Fed Chair Jerome Powell in the Senate Banking Committee as well as further comments from other Fed officials, ahead of tomorrow's highly awaited US consumer price index report.

"Should Powell give any hint of an even more aggressive desire to tighten by the US central bank, which could entail a rate hike in March, rather than in June, and faster unwinding of its balance sheet, then we can expect a more bullish US dollar, potentially challenging the November maximums."

New York was pointed to a higher open. The Dow Jones Industrial Average was called 0.3% higher, the S&P 500 up 0.4%, and the Nasdaq Composite up 0.5%, based on futures trading.

In the FTSE 100, Scottish Mortgage Trust was the best performer, up 4.3%, tracking a rise in high-profile US technology companies in which it holds shares. The trust holds a 5.2% stake in Elon Musk's Tesla and also has a 3.1% holding in Jensen Huang's Nvidia. Tesla and Nvidia were up 0.7% and 0.6% respectively in pre-market trade. Tesla had added 3.0% on Monday and Nvidia 0.6%.

Flutter Entertainment was up 3.7% after Citigroup double-upgraded the gambling firm to Buy from Sell. The Dublin-based company also said it completed the acquisition of bingo operator Tombola for an enterprise value of GBP402 million.

Dechra Pharmaceuticals was up 2.7%. The veterinary products company said it has agreed terms with Anivive Lifesciences to acquire the worldwide rights to verdinexor, used to treat of all forms and stages of canine lymphoma in dogs.

Under the terms of the agreement, Dechra will acquire the global product rights and a first right of refusal for other species along with the trademark Laverdia.

Phoenix Group Holdings was up 2.5% after the closed life funds consolidator said it completed GBP4.0 billion of bulk purchase annuity transactions in the second half of 2021.

The London-based company said it completed four bulk purchase annuity transactions comprising of GBP3.6 billion of external deals and a further GBP400 million tranche of the group's pearl pension scheme.

Phoenix said this equates to total bulk purchase annuity premiums of GBP5.5 billion contracted for the year. This has more than doubled when compared to its 2020 figure of GBP2.5 billion.

As a result, Phoenix said it now expects to deliver in excess of GBP1 billion of total new business long-term cash generation for 2021 which it added will more than offset a GBP800 million run-off of the in-force business.

Conversely, Unilever was among the worst blue-chip performers, down 0.9%, after Bank of America downgraded the consumer goods firm to Neutral from Buy.

In the FTSE 250, Darktrace was giving back earlier gains but was still the best performer, up 10%. The stock, which was demoted from the FTSE 100 in December, is now up almost 75% from its April listing price.

The cybersecurity firm said it continued to deliver strong growth across its customer base in the first half as it raised annual guidance.

In a trading update for the six months to December 31, Darktrace reported 40% growth in number of customers - adding 6,531 customers in the period.

Looking ahead, Darktrace now expects annual recurring revenue for financial 2022 to rise by between 37% and 38.5%, up from previous guidance of 34% to 36%. Further, net revenue is set to grow by 42% to 44%, up from 37% to 39% previously guided.

Micro Focus International was up 9.5% after Jefferies raised the Newbury-based software firm to Buy from Hold.

Hays was the third-best midcap stock, up 5.1%, after Credit Suisse double-upgraded the headhunter to Outperform from Underperform.

On AIM, Shoe Zone was up 20% after the discount footwear chain swung to a full-year profit despite stores only trading for 36 weeks.

For the year ended October 2, the Leicester-based retailer reported a pretax profit of GBP9.5 million, swinging sharply from a loss of GBP14.6 million in financial 2020. Revenue was down 2.8% to GBP119.1 million from GBP122.6 million the previous financial year.

Elsewhere, the UK Financial Conduct Authority said it will launch two probes this year into the provision of wholesale financial data by stock exchanges and credit ratings agencies.

The FCA said input it has received so far raised concerns that "limited competition in the markets for benchmarks and indices, credit ratings and trading data may increase costs for investors and affect investment choices."

The financial regulator said the first of the two investigations will begin this summer with a look in whether "complex contracts" for benchmarks and indices prevent switching to cheaper or better-quality alternatives. By the end of the year, the FCA will launch a second study looking at "whether high charges for access to credit ratings data is adding costs to investors and limiting new market entrants".

The FCA said that concerns have been raised that limited competition for wholesale trading data provided by trading venues such as stock exchanges "may increase costs and have an impact on the types of assets that investment managers buy and sell".

The pound was quoted at USD1.3600 at midday Tuesday, up from USD1.3567 at the London equities close Monday.

The euro was priced at USD1.1334, higher against USD1.1327 late Monday. Against the Japanese yen, the dollar was trading at JPY115.47, up from JPY115.14.

Brent oil was quoted at USD82.00 a barrel Tuesday at midday, up sharply from USD81.26 at the London equities close on Monday. Gold stood at USD1,806.40 an ounce, rising from USD1,795.34.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com