LONDON MARKET MIDDAY: Tentative gains as markets await Powell speech

Wed, 25th Aug 2021 12:14

(Alliance News) - Stock prices in London were registering small gains at midday on Wednesday as investors look cautiously ahead to the Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium on Friday.

"There is speculation that the Fed may announce a timetable for tapering at the September policy meeting, so markets will be listening to Powell this week very carefully for further details," said analysts at Lloyds.

The FTSE 100 index was up 14.20 points, or 0.2%, at 7,140.12. The mid-cap FTSE 250 index was up 142.91 points, or 0.6%, at 24,028.92. The AIM All-Share index was up 0.5% at 1,279.03.

The Cboe UK 100 index was up 0.4% at 710.41. The Cboe 250 was up 0.6% at 21,858.52. The Cboe Small Companies was down 0.1% at 15,444.81.

In mainland Europe, the CAC 40 stock index in Paris was 0.3% higher, while the DAX 30 in Frankfurt was down 0.1%.

In the FTSE 100, Just Eat Takeaway was up 0.9%. The food ordering platform will employ 1,500 people in a new UK customer service site as it brings jobs back from India and Bulgaria.

Just Eat said it will invest GBP100 million in the region over the next five years, with staff working partly from home and partly from its new Sunderland-based office in the north east of England. UK Managing Director Andrew Kenny said that the company would shoulder the extra cost of bringing the staff in-house because it allowed Just Eat to provide better service.

Even as Just Eat is bringing jobs home to the UK, it is being ejected from the FTSE 100 index for being too Dutch.

FTSE Russell, after the market close Tuesday, said shares of the Anglo-Dutch company would be removed from the UK flagship index, having reassigned the company's nationality from the UK to the Netherlands and making the company ineligible for the FTSE UK Index Series.

As a result, Dechra Pharmaceuticals, with a market capitalisation of GBP5.75 billion, will take Just Eat's place in the FTSE 100. Dechra shares were up 0.9% on Wednesday.

In addition, FTSE Russell indicated that aerospace parts maker Meggitt and grocer Wm Morrison Supermarkets, with market values of GBP6.53 billion and GBP7.04 billion respectively, will be added to the FTSE 100.

Morrisons shares have risen 70% over the last six months as the Bradford-based grocer found itself the object of a protracted bidding war between private equity firms. Meggitt was up 0.2% on Wednesday, while Morrisons was up 0.1%.

Meggitt and Morrisons will replace engineer Weir Group and broadcaster ITV in the FTSE 100, which have market capitalisations of GBP4.35 billion and GBP4.64 billion respectively. Weir Group was the best blue-chip performer, up 3.1%, while ITV was up 1.4%.

The quarterly FTSE index review will use data from next Tuesday's close, with confirmed rebalance changes announced after the market close on Wednesday, September 1 - meaning the final results of the review could differ from the indicative changes. The reshuffle will take effect on Monday, September 20.

At the other end of the large-caps list, precious metals miners Fresnillo and Polymetal International were down 0.9% and 0.4% respectively, tracking spot gold prices lower.

Gold was quoted at USD1,793.55 an ounce Wednesday at midday, down from USD1,806.44 late Tuesday in London.

J Sainsbury was down 0.6% after Bank of America downgraded the supermarket chain, and rumoured bid target, to underperform from neutral.

In the FTSE 250, Rank Group was up 3.5% after the casino operator noted the decision by the UK tax authority to not appeal the tribunal decision on Rank's VAT refund claim, meaning Rank stands to receive a refund of around GBP80 million.

Marks & Spencer was up 3.3% after Deutsche Bank started coverage on the food, clothing and homewares retailer with a Buy rating. In addition, the German bank initiated coverage on fast-fashion retailers ASOS and boohoo at Buy. The AIM-listed stocks were up 1.8% and 1.5% respectively.

The dollar was mixed against major counterparts. The pound was quoted at USD1.3730 at midday on Wednesday, up slightly from USD1.3721 at the London equities close Tuesday.

The euro stood at USD1.1745, marginally below USD1.1747 late Tuesday. Against the yen, the dollar was trading at JPY109.79, up slightly from JPY109.67.

"Traders are wary of taking a net short position on the dollar as the Jackson Hole event could spur another round of dollar-positive sentiment with the possibility of more hawkish comments from the Federal Reserve Chair Jerome Powell. There is a souring sentiment around whether Powell will commit anything due to the rising Delta Covid cases. Any backtracking could see the dollar come under immense selling pressure," said analysts at Western Union.

Brent oil was trading at USD70.97 a barrel Wednesday morning, up from USD70.73 late Tuesday.

US stock market futures were flat on Wednesday despite news that President Joe Biden's multi-trillion-dollar spending plans were edging closer to fruition.

Biden's plans to spend nearly USD5 trillion to change the world's largest economy advanced in the House of Representatives on Tuesday, after Democratic leaders reached an agreement with centrist lawmakers to end a dispute that threatened the bills.

Biden and his Democratic allies controlling the chamber are pushing for passage of both a USD1.2 trillion overhaul to the country's infrastructure and a bill costing USD3.5 trillion over 10 years that would pay for improvements to education, health care and climate change resiliency.

While the infrastructure bill has already won passage in the Senate with some votes from Republicans, Democrats have found no opposition support for the second, larger bill, and were planning to approve it with their votes alone - a tough task given their narrow majorities in both chambers of Congress.

The economic events calendar for Wednesday US durable goods orders at 1330 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com