LONDON MARKET OPEN: Miners fall; mood sombre before Fed minutes

(Alliance News) - Stock prices in London opened lower, with mining stocks leading the decline, as a risk-off mood swept over global equities after a sell-off on Wall Street.

The FTSE 100 index opened down 82.85 points, 1.0%, at 7,894.88. The FTSE 250 was down 211.02 points, 1.1%, at 19,639.83, and the AIM All-Share was down 6.32 points, 0.7%, at 855.84.

The Cboe UK 100 was down 1.0% at 790.94, the Cboe UK 250 shed 1.2% at 17,122.52, and the Cboe Small Companies fell 0.2% at 14,031.89.

In European equities on Wednesday, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 0.5%.

Stocks on Wall Street dropped sharply on Tuesday. The Dow Jones Industrial Average ended down 2.1%, the S&P 500 down 2.0% and the Nasdaq Composite down 2.5%.

Investors were looking ahead to the minutes from the US central bank's last policy meeting, which are due out at 1900 GMT.

"Investors are waking up to a stark realisation that the Fed’s work is not done, and that interest rates may have to be hiked even higher to cool hot inflation," said Hargreaves Lansdown's Susannah Streeter.

Last week's hotter-than-expected US consumer price index showed that inflation is proving stickier than many had hoped. The US economy is also proving resilient, even in the face of historically high interest rates.

On Tuesday, the S&P Global flash composite purchasing managers' index reading climbed to an eight-month high of 50.2 points in February, from January's final tally of 46.8. Rising above the 50.0 no change mark, the reading suggests the US private sector returned to growth.

"High hopes that the Federal Reserve could cut rates by the end of the year have been dashed, replaced by worries that up to three hikes in quick succession may be needed to tame the price spiral," HL's Streeter added.

The dollar was slightly stronger.

Sterling was quoted at USD1.2110 early Wednesday, lower than USD1.2121 at the London equities close on Tuesday. The euro traded at USD1.0657, lower than USD1.0673. Against the yen, the dollar was quoted at JPY134.73, little changed from JPY134.74.

In the FTSE 100, Rio Tinto fell 2.1% in early trade.

For 2022, the Anglo-Australian mining and metals company declared a final dividend of USD2.25 from USD4.17 a year prior.

Rio Tinto, which has numerous assets worldwide, reported pretax profit of USD18.66 billion, down 39% from USD30.83 billion a year prior. Revenue decreased to USD55.55 billion, 12% lower than USD63.50 billion in 2021, but marginally above JPMorgan analyst expectations of USD52.49 billion.

Net earnings fell 41% to USD12.4 billion from USD21.1 billion the previous year. Rio Tinto attributed this to movement in commodity prices, alongside the impact of higher energy and raw materials prices on operations, and higher rates of inflation on operating costs and closure liabilities.

"Despite challenging market conditions, we remain resilient because of the quality of our assets, our great people and the strength of our balance sheet," said Chief Executive Jakob Stausholm.

In a negative read-across, bluechip mining peers Antofagasta and Glencore both fell 2.9%, while Endeavour and Anglo American lost 2.4%.

Gold was quoted at USD1,839.52 an ounce early Wednesday in London, edging up from USD1,837.01 late Tuesday. Brent oil was trading at USD82.57 a barrel, flat from USD82.73.

Lloyds Banking shed 2.0%

The bank said net interest income rose 49% to GBP13.96 billion in 2022. Total income, net of insurance claims and changes in contract liabilities, rose 12% to GBP18.21 billion.

Pretax profit was little changed at GBP6.93 billion, compared to GBP6.90 billion.

Lloyds said "higher net income and lower total costs [were] offset by impairment charges as a result of the revised economic outlook (versus a significant write-back in 2021)".

The bank proposed a final dividend of 1.60 pence, bring the total to 2.40p, which is up 20% on 2021. It also announced the launch of a GBP2.0 billion share buyback.

"Once these distributions are accounted for, a CET1 ratio of 14.1% is still ahead of company targets highlighting the strength of the capital position," said Matt Britzman, equity analyst at Hargreaves Lansdown.

"That’s a strong position to be in as we head into murky waters and opens the door for further distributions down the line."

InterContinental Hotels fell 1.3%, as Deutsche Bank cut the stock to 'hold' from 'buy'. It was a better morning for WPP, which rose 0.5% as Credit Suisse raised the stock to 'outperform' from 'neutral'.

Among London's midcaps, Capital & Counties rose 1.6%, as Shaftesbury fell 0.8%.

The UK Competition & Markets Authority unconditionally cleared the merger of the two property groups, and confirmed it won't refer the merger for a Phase 2 investigation. The all-share merger will create a London-focused property investor with a combined portfolio value of GBP5.0 billion.

On AIM, Sanderson Design added 9.7%.

The interior design and furnishings company announced a "major" licensing deal with retailer Next for its Clarke & Clarke brand. Under the agreement, Next will hold exclusive rights to produce a "very broad range" of Clarke & Clarke homeware products.

Sanderson will recognise accelerated licensing income of GBP2.6 million in the current financial year relating to the agreement.

"Clarke & Clarke is already the company's largest brand by revenue and this agreement brings further multi-year income potential along with the endorsement of a major UK retailer," said CEO Lisa Montague.

It was largely a more muted day of trading in Asia on Wednesday. The Nikkei 225 index closed down 1.3% in Tokyo. In China, the Shanghai Composite lost 0.5%, while the Hang Seng index in Hong Kong fell 0.5%. The S&P/ASX 200 in Sydney closed down 0.3%.

By Elizabeth Winter, Alliance News senior markets reporter

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