LONDON MARKET OPEN: FTSE Gains In Mixed European Open After Fed Cut

(Alliance News) - Europe opened mixed on Wednesday after Wall Street's negative reaction to a surprise US interest rate cut, with London's FTSE 100 leading the way, bolstered by DS Smith.

The FTSE 100 index was up 4.98 points, or 0.1%, at 6,723.18 early Wednesday. The mid-cap FTSE 250 index was down 33.97 points, or 0.2%, at 19,648.68. The AIM All-Share index was down 0.2% at 881.67.

The Cboe UK 100 index was up 0.2% at 11,378.69 points. The Cboe 250 was down 0.4% at 17,584.22, and the Cboe Small Companies up 0.3% at 11,580.41.

In mainland Europe, the CAC 40 in Paris was down 0.6% while the DAX 30 in Frankfurt was 0.4% lower early Wednesday.

"US equity markets finished down despite the Fed's move as concerns about the economic impact of the coronavirus dominated. However, the rise in Asian equities may also reflect hopes that the Fed's move will prove part of a global effort by policymakers to boost demand," said Lloyds Bank.

To come on Wednesday is an interest rate decision from the Bank of Canada, at 1500 GMT, with analysts expecting a rate cut.

This follows the US Federal Reserve slashing interest rates by 50 basis points on Tuesday, just before the European market close, as it noted the coronavirus "poses evolving risks to economic activity".

"A traditional textbook trade would have pushed the stocks higher, blasting the roofs and ripping all the previous highs. However, there was nothing close to this level, markets took the message as a sign of panic," said Naeem Aslam at AvaTrade.

The Dow Jones Industrial Average ended down 2.9%, the S&P 500 down 2.8% and the Nasdaq Composite 3.0%.

However, sentiment recovered in the Asian session overnight. The Japanese Nikkei 225 index closed up 0.1%. In China, the Shanghai Composite ended up 0.6%, while the Hang Seng index in Hong Kong closed down just 0.2%.

DS Smith led the way in the FTSE 100 early Wednesday in London, up 2.8% as it said trading has continued to "progress well" with no material impact from the coronavirus.

Like-for-like corrugated box volume growth has increased during the second half of its financial year, with good performances in Iberia, eastern Europe and the UK. The domestic US business remains "robust", though lower US paper export prices are ongoing amid reduced demand from China.

"The group has delivered a robust performance during the period within a challenging macro-economic environment. Whilst we continue to monitor events and work closely with all our suppliers and customers, we have not to date seen any material impact to our business from coronavirus," said Chief Executive Miles Roberts.

Legal & General was among the worst blue-chip performers, down 2.7%.

Pretax profit in 2019 was 1.3% higher at GBP2.16 billion from GBP2.13 billion, but below company-compiled market consensus, which forecast pretax profit of GBP2.29 billion. Gross written premiums, meanwhile, were up 18% to GBP15.20 billion from GBP12.84 billion.

The financial services firm lifted its full-year dividend by 7% to 17.57p.

intu shares slumped 40% after the retail property investor concluded that, after engaging in talks over the past few months, it is "unable" to proceed with an equity raise.

"While a number of intu's shareholders and potential new investors indicated their support for an equity raise, the board believes the current uncertainty in the equity markets and retail property investment markets precluded a number of potential investors from committing capital into the business and intu was therefore unable to reach the target quantum at the current time," the retail property investor said.

intu said it will "continue and broaden" its conversations to discuss the range of options available, which include alternative capital structures and further disposals.

Meanwhile, it said it delivered a "robust" operational performance in a challenging 2019 for the retail industry.

Footfall in intu centres was up 0.3%, with UK footfall flat. Independent valuations of intu's portfolio at December 31 resulted in a valuation deficit of GBP2.0 billion for 2019, a like-for-like decrease in value of 22% for the year.

Peer Hammerson slipped 5.7%.

Sirius Minerals rose 17% after its takeover by Anglo American was approved by shareholders.

The vote, meeting and long wait came after Sirius failed to raise the funds it needed for a fertiliser mine, forcing the board to recommend the GBP405 million rescue package. Typically, a delayed result suggests the numbers are too close to call.

Announcing the result, Sirius said the resolutions had been passed "by the requisite majorities".

They were being asked to vote in favour of the 5.5 pence per share offer, despite some paying as much as 25p a share when the company was growing. Sirius shares were quoted at 5.48p early Wednesday.

Anglo American shares were up 1.2%. The London and Johannesburg-listed miner separately Wednesday reported a substantial decline in rough diamonds sales from its De Beers unit in its second sales cycle for 2020 as it deferred allocations amid the coronavirus outbreak. It said the value of rough diamond sales in the second 2020 cycle totalled USD355 million.

The pound was quoted at USD1.2785 early Wednesday, down compared to USD1.2809 at the close on Tuesday.

The euro stood at USD1.1166 on Wednesday, soft on USD1.1173 at the same time on Tuesday. Against the yen, the dollar was trading at JPY107.36, firm compared to JPY107.33 late Tuesday.

Brent oil was quoted at USD51.78 a barrel early Wednesday, down from USD52.37 late Tuesday. Gold was quoted at USD1,636.75 an ounce on Wednesday, flat versus USD1,636.30 at the close on Tuesday.

In the economic calendar on Wednesday, there are services PMIs due from Germany, the EU, the UK and the US at 0855 GMT, 0900 GMT, 0930 GMT and 1445 GMT respectively.

Outside of the PMI releases, there are eurozone retail sales at 1000 GMT. There is US ADP employment change at 1315 GMT and the ISM's non-manufacturing report at 1500 GMT.

Also ahead is the FTSE index review due after the London market close on Wednesday, which could see NMC Health, TUI and Kingfisher kicked out the FTSE 100 and replaced with Intermediate Capital Group, Pennon Group and Fresnillo.

By Lucy Heming; lucyheming@alliancenews.com

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