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London open: Stocks steady ahead of Fed minutes
London stocks were flat in early trade on Wednesday following solid gains in the previous session, as investors eyed the latest Federal Reserve minutes.
At 0825 GMT, the FTSE 100 was steady at 7,505.26.
Richard Hunter, head of markets at Interactive Investor, said: “After a sprightly start to the New Year, investor focus switched to the more pressing issue of interest rate hike expectations.
“Rising Treasury yields in the US prompted a bout of rotation from high growth stocks, such as technology, into value, boosting financial and industrial shares.
“In particular, interest rate sensitive stocks such as the banks attracted buying interest ahead of the imminent fourth quarter reporting season. Although it is extremely unlikely that rates will rise to historical levels, there is nonetheless an improvement in sentiment given that the impending environment should improve prospects for the banks over the coming months.
“Minutes are due later from the latest Federal Reserve meeting in December, and will likely reveal the latest thinking on the need to curb stubbornly high inflation by tightening policy. As such, the current expectation is for an initial hike in March, which is part of the reason for rising yields.”
In corporate news, gambling software maker Playtech was in focus after it and potential bidder JKO asked Britain’s Takeover Panel for more time for the latter to declare its intentions on any takeover offer. Playtech said it was also postponing court and shareholder meetings relating to the offer by Aristocrat Leisure, previously scheduled for January 12 to February 2.
Aristocrat is the current frontrunner to acquire Playtech after the two businesses agreed to a £2.7bn deal in October.
With little in the way of corporate news, broker notes were moving shares. Online supermarket Ocado rallied after an upgrade to ‘buy’ from ‘hold’ at Berenberg, while LSE was boosted by an upgrade to ‘buy’ from ‘neutral’ at Citi.
Plumbing and heating products distributor Ferguson was also in the black after an upgrade to ‘buy’ from ‘hold’ at Berenberg.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | +3.89% | +60.50 | 1,616.50 |
| 2 |  |
Kingfisher Plc | +1.32% | +4.60 | 352.20 |
| 3 |  |
Melrose Industries Plc | +1.22% | +2.05 | 169.90 |
| 4 |  |
Marks And Spencer Group Plc | +1.22% | +2.90 | 241.40 |
| 5 |  |
Bp Plc | +1.21% | +4.25 | 355.25 |
| 6 |  |
Intercontinental Hotels Group Plc | +1.19% | +60.00 | 5,088.00 |
| 7 |  |
Mondi Plc | +1.19% | +22.00 | 1,876.00 |
| 8 |  |
Smurfit Kappa Group Plc | +1.02% | +42.00 | 4,154.00 |
| 9 |  |
Bt Group Plc | +1.01% | +1.75 | 174.40 |
| 10 |  |
Johnson Matthey Plc | +0.92% | +19.00 | 2,087.00 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
International Consolidated Airlines Group S.a. | -2.04% | -3.24 | 155.28 |
| 2 |  |
National Grid Plc | -1.28% | -13.80 | 1,064.20 |
| 3 |  |
Prudential Plc | -1.22% | -16.00 | 1,299.00 |
| 4 |  |
Rentokil Initial Plc | -1.19% | -6.80 | 562.40 |
| 5 |  |
Informa Plc | -1.11% | -6.00 | 535.80 |
| 6 |  |
Unilever Plc | -1.09% | -43.50 | 3,952.50 |
| 7 |  |
Tui Ag | -1.02% | -2.60 | 252.90 |
| 8 |  |
Berkeley Group Holdings (the) Plc | -1.00% | -49.00 | 4,854.00 |
| 9 |  |
Relx Plc | -0.89% | -21.00 | 2,349.00 |
| 10 |  |
United Utilities Group Plc | -0.82% | -9.00 | 1,082.50 |
Europe open: Shares tread water after Tuesday rally
European shares edged ahead at the open on Wednesday after the previous session’s rally, as investors eyed higher US Treasury yields and the latest Federal Reserve minutes.
The pan-regional Stoxx 600 index was flat in early deals.
“Rising Treasury yields in the US prompted a bout of rotation from high growth stocks, such as technology, into value, boosting financial and industrial shares,” said Interactive Investor head of markets Richard Hunter.
“In particular, interest rate sensitive stocks such as the banks attracted buying interest ahead of the imminent fourth quarter reporting season. Although it is extremely unlikely that rates will rise to historical levels, there is nonetheless an improvement in sentiment given that the impending environment should improve prospects for the banks over the coming months.”
“Minutes are due later from the latest Federal Reserve meeting in December, and will likely reveal the latest thinking on the need to curb stubbornly high inflation by tightening policy. As such, the current expectation is for an initial hike in March, which is part of the reason for rising yields.”
In equity news, Dutch tech investor Prosus, which has a stake in China’s Tencent, slid almost 3% after a market regulator fined units of several Chinese tech firms for failing to properly report around 12 deals.
Shares in automaker Stellantis rose on news that its Chrysler brand was planning to shift to an all-electric lineup by 2028 and introduce new products, while German carmaker BMW gained as it achieved record sales of more than 2.2 million vehicles from its BMW marque in 2021.
US close: Legacy carmakers surge on mixed day for stocks
Wall Street stock markets closed in a mixed fashion on Tuesday, with the Dow reaching a new all-time high, following the release of slightly weaker-than-expected economic data.
At the close, the Dow Jones Industrial Average was up 0.59% at 36,799.65, while the S&P 500 slipped 0.06% to 4,793.54, with lagging technology plays dragging the Nasdaq Composite down 1.33% to settle at 15,622.72.
“Wall Street kept things fizzing with another flutter over the $3trn mark by Apple – the tech giant seemingly uncowed by supply chain issues and the slow squeeze on household budgets,” said AJ Bell financial analyst Danni Hewson.
“The figure is so incomprehensible to most people, it really is just a number.
“What investors will be watching for is how long it will take for the next tech innovation to make it to market and how quickly cash-strapped consumers can be persuaded to shell out to possess it.”
Hewson said that Tesla’s sparkle, meanwhile, had faded somewhat, although there was “little doubt” that 2022 would be a pivotal year for the electric vehicle industry.
“Old timers are coming up with new tricks and news from Ford that it’s set to double production of its F150 Lightning pickup set pulses racing, whilst Toyota nabbed the mantle of best-selling car maker in the US for the first time,” Hewson noted.
“Change is most definitely afoot, and if manufacturers can bulldoze their way through supply issues, the next 12 months offer mouth-watering opportunities.”
The apparent enthusiasm in the markets came despite the Omicron wave of Covid-19 infections continuing to break records stateside, with Johns Hopkins University data showing 1.08 million new infections on Monday to more than double the previous high set just four days prior.
Omicron was still appearing to be causing less serious illness, however, with hospitalisations rising 41% over the past fortnight to reach a seven-day average of almost 98,000 on Monday – still below the pandemic peak of 137,510 a year ago, and the record of 102,967 seen during the Delta wave in September.
On the economic front, the Institute for Supply Management‘s factory sector purchasing managers’ index (PMI) slipped to 58.7 in December, from November’s print of 61.1.
Analysts at Barclays had been anticipating a reading of 61.0, while the sub-index tracking the prices paid by firms suffered a big drop to 68.2 from 82.4.
The Department of Labor’s JOLTS job market survey, meanwhile, revealed a drop in the number of job openings to 10.56 million in November, from 11.09 million in October.
In equity markets, carmakers were in focus, with Ford rocketing 11.67% to reach a 21-year high after announcing plans to near-double Michigan production of its F150 Lightning pickup truck to 150,000 vehicles annually.
Ford’s longtime foe General Motors accelerated ahead by 7.47% after the maker of Chevrolet and Buick cars said semiconductor supply problems eased in the fourth quarter.
GM said it delivered 43% fewer vehicles in the last three months of 2021, while sales were at their highest in 13 years, and inventory at dealerships rose 55% from their record lows at the end of the third quarter.
On the downside, consumer electronics behemoth Apple was among the losers in the tech space, retreating 1.3% after it momentarily breached the $3trn market cap level during Monday’s session.
Wednesday newspaper round-up: Gas prices, fossil fuel firms, British Lithium
European gas prices have risen by more than 30% on Tuesday, adding to mounting concerns about the cost of heating a home, as supplies that usually come into Europe from Siberia continued to flow eastwards for the 15th day in a row. The Kremlin has repeatedly denied using Russia’s vast gas resources to turn the screw on Europe, after gas coming through the Yamal-Europe pipeline reversed direction three days before Christmas. – Guardian
Fossil fuel companies and firms that work closely with them are among the biggest spenders on ads designed to look like Google search results, in what campaigners say is an example of “endemic greenwashing”. The Guardian analysed ads served on Google search results for 78 climate-related terms, in collaboration with InfluenceMap, a thinktank that tracks the lobbying efforts of polluting industries. – Guardian
Fears of New Year chaos at Britain’s borders have so far proven unfounded after the introduction of additional post-Brexit customs checks. Port bosses said there is cautious optimism that the controls imposed on Jan 1 have been rolled out without major disruption for importers, despite warnings that lorries were at risk of being turned away. – Telegraph
British Lithium has taken a crucial step towards commercial production in the UK in a boost for the country’s electric car drive. The company’s pilot plant in Cornwall is now capable of making 5kg a day of lithium carbonate, which is regarded as more cost-effective for mass market cars than the lithium hydroxide used in more expensive models. – Telegraph
The private equity firm behind a £1.2 billion bid for Clinigen is under pressure to raise its offer, with Elliott Management understood to be among several hedge funds believing that it undervalues the drugs provider. Triton Investment Management’s 883p-a-share cash offer for Clinigen was recommended by the British company’s board last month. The proposal is at a 41 per cent premium to Clinigen’s ex-dividend share price at the start of the month, before the offer period began. – The Times
