London stocks were in the red at the close on Wednesday, as investors sifted through a raft of earnings news and awaited the latest policy announcement from the US Federal Reserve.
The FTSE 100 ended the session down 0.36% at 7,248.89, and the FTSE 250 was 0.1% weaker at 23,116.97.
Sterling was in positive territory, however, last trading 0.36% stronger on the dollar at $1.3661, and gaining 0.31% against the euro to change hands at €1.1793.
“Quiet has dominated throughout the day as markets await today’s Federal Open Market Committee (FOMC) meeting, and the expected tapering of asset purchases,” said IG chief market analyst Chris Beauchamp.
“Fed days are never the busiest, and with so much on the calendar over the coming two days the inevitable atmosphere is one of expectation.
“The taper itself is likely to be a non-event, and instead markets want to hear more about the outlook for inflation and growth, and any hints on interest rate rises.”
That, Beauchamp said, was where volatility could emerge, adding that equity markets could be “a touch vulnerable” after their October gains.
“Of course the big impact will be on the dollar, with consequent effects on a host of other assets.
“It doesn’t stop here, with the Bank of England tomorrow and US non-farm payrolls on Friday providing the chance for additional volatility.”
On the economic front, a closely-watched survey showed that a buoyant services sector helped bolster the UK economy last month, although inflationary pressures continued to mount.
The IHS Markit services PMI business activity index, published ahead of November’s BoE rate-setting meeting on Thursday, came in at 59.1 in October, a three-month high and up on September’s 55.4.
It was also above consensus and the flash estimate, both for 58.0.
However, stronger demand, staff shortages and under-pressure supply chains caused inflationary pressures to spike, with operating expenses and prices charged by service providers rising at the steepest rates since the survey began in 1996.
As a result, the degree of positive sentiment about the year ahead eased, and is now at its lowest point since January.
“Some 59% of the survey panel reported an increase in their average costs during October, compared with only 15% at the same time in 2020,” said Tim Moore, economics director at IHS Markit.
“Record rates of input price and output charge inflation appear to have dampened business optimism.
“Comments from survey respondents also cited worries about prolonged staff shortages and constraints on growth due to the supply chain crisis.”
Small manufacturers saw growth slow in the last three months, according to another survey, after labour and supply shortages hit home.
The latest CBI SME trends survey showed growth in output volumes in the three months to October slowed to a balance of 14% from July’s high of 36%.
Output remained above the long-run average of 0%, and is expected to improve in the coming quarter.
However, total new orders also slowed, to 24% from 46%, with both domestic and export orders easing.
“The optimism of the summer has given way to an uncertain autumn for small and medium-sized enterprises in the manufacturing sector, as firms struggle with persistent supply challenges and acute cost and price pressures,” said Alpesh Paleja, lead economist at the Confederation of British Industry.
UK house prices, meanwhile, edged higher in October, despite the stamp duty holiday coming to an end, with the average place to live now costing more than a quarter-of-a-million pounds for the first time.
The Nationwide monthly house price index came in at 497.8 in October, up on September’s 494.6, while the average price for a house in the UK is now £250,311.
On a seasonally-adjusted basis, house prices rose by 0.7% month-on-month, compared to September’s 0.2% improvement.
“Demand for homes has remained strong, despite the expiry of the stamp duty holiday at the end of September,” said Robert Gardner, chief economist at Nationwide.
“Indeed, mortgage applications remained robust at 72,645 in September, more than 10% above the monthly average recorded in 2019.
“Combined with a lack of homes on the market, this helps to explain why price growth has remained robust.”
In equity markets, Darktrace slumped 5.14% after private equity firm Vitruvian Partners sold 11 million shares in the cybersecurity group in a placing.
The shares were sold at 580p each, raising gross proceeds of around £63.8m.
Next fell 3.32% after the retailer reported better-than-expected full-price sales in the last five weeks, but warned that momentum would slow in the final quarter due to diminishing pent-up demand from Covid-19 lockdowns and supply-chain constraints.
Trainline skidded 7.07% even after the online ticket seller said it had returned to profitability in the first half as passengers returned to rail and shifted to digital ticketing.
Pets at Home lost 1.88% after it upgraded its full-year profit expectations but announced the departure of chief executive Peter Pritchard.
Cairn Energy reversed earlier momentum to close 0.16% weaker, having gained earlier as the oil and gas producer’s long-running dispute with the Indian government appeared to be drawing to a close.
On the upside, miners gained as copper and iron ore prices rose, with Antofagasta up 1.18%, Anglo American adding 1.49%, Glencore rising 0.35% and BHP 0.77% higher.
Anglo American was also boosted by an upgrade to ‘buy’ from ‘hold’ at Liberum.
British Airways and Iberia owner IAG ascended 2.33% after German competitor Lufthansa said it had returned to profit for the first time since the pandemic.
Royal Mail was boosted 1.5% by an upgrade to ‘neutral’ from ‘sell’ at UBS.
Micro Focus surged 10.04% after it agreed the sale of its archiving and risk management portfolio to Smarsh for $375m in cash.
Ibstock was on the front foot by 1.68% after the brick manufacturer backed its full-year guidance and reported strong trading in the third quarter.
In an update for the quarter ended 30 September, the company said it was underpinned by continued “robust” demand in core markets.
Supply chain impacts were well managed, with both divisions delivering a resilient operational performance.
Advertising giant WPP gained 1.67% after an upgrade to ‘market perform’ at Bernstein.
Market Movers
FTSE 100 (UKX) 7,248.89 -0.36%
FTSE 250 (MCX) 23,116.97 -0.10%
techMARK (TASX) 4,579.34 0.03%
FTSE 100 – Risers
Pearson (PSON) 607.60p 2.98%
Fresnillo (FRES) 877.20p 2.81%
International Consolidated Airlines Group SA (CDI) (IAG) 167.16p 2.33%
Smith & Nephew (SN.) 1,292.50p 1.93%
WPP (WPP) 1,066.50p 1.67%
Royal Mail (RMG) 439.20p 1.50%
Anglo American (AAL) 2,760.50p 1.49%
Johnson Matthey (JMAT) 2,718.00p 1.41%
CRH (CDI) (CRH) 3,659.00p 1.36%
Burberry Group (BRBY) 1,923.50p 1.34%
FTSE 100 – Fallers
Darktrace (DARK) 600.00p -5.14%
Coca-Cola HBC AG (CDI) (CCH) 2,516.00p -3.42%
Next (NXT) 8,038.00p -3.30%
BP (BP.) 334.85p -2.93%
Informa (INF) 523.20p -2.17%
B&M European Value Retail S.A. (DI) (BME) 610.00p -1.99%
Royal Dutch Shell ‘A’ (RDSA) 1,630.00p -1.99%
JD Sports Fashion (JD.) 1,083.00p -1.95%
Royal Dutch Shell ‘B’ (RDSB) 1,629.40p -1.75%
London Stock Exchange Group (LSEG) 7,058.00p -1.51%
FTSE 250 – Risers
Micro Focus International (MCRO) 398.60p 10.04%
4Imprint Group (FOUR) 2,950.00p 3.51%
Diversified Energy Company (DEC) 109.40p 3.21%
Indivior (INDV) 258.00p 3.20%
Aston Martin Lagonda Global Holdings (AML) 1,752.00p 3.15%
Convatec Group (CTEC) 220.70p 2.84%
Bodycote (BOY) 813.00p 2.72%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,650.00p 2.71%
Discoverie Group (DSCV) 1,074.00p 2.68%
Wizz Air Holdings (WIZZ) 4,817.00p 2.38%
FTSE 250 – Fallers
Trainline (TRN) 299.60p -7.07%
Future (FUTR) 3,286.00p -5.47%
Mitchells & Butlers (MAB) 241.60p -5.33%
Moonpig Group (MOON) 331.80p -4.93%
Rank Group (RNK) 160.00p -3.85%
C&C Group (CDI) (CCR) 250.40p -3.84%
Energean (ENOG) 889.50p -3.73%
Restaurant Group (RTN) 85.40p -2.73%
PZ Cussons (PZC) 211.50p -2.53%
Biffa (BIFF) 388.50p -2.51%
