Equities in London were on the back foot on Wednesday afternoon, as unease in markets continued amid a less favourable US interest rate outlook.
It would be a ‘mistake’ for the US Federal Reserve to start cutting interest rates too soon, despite its recent progress against inflation, a senior Fed official said Tuesday.
On Tuesday, Cleveland Fed president Loretta Mester, who is a voting member of the Fed’s rate-setting committee this year, joined Powell in pouring cold water on the idea of imminent cuts.
Among individual shares, Smurfit Kappa was on the up on a dividend hike. Barratt slid, though Redrow rose as the duo announced a tie-up.
The FTSE 100 index was down 33.13 points, 0.4%, at 7,647.88. The FTSE 250 was down 20.72 points, 0.1%, at 19,150.62, and the AIM All-Share was down 2.61 points, 0.4%, at 751.56.
The Cboe UK 100 was down 0.5% at 765.30, the Cboe UK 250 was down 0.2% at 16,583.00, and the Cboe Small Companies was up 0.5% at 14,715.03.
In European equities on Wednesday, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was down 0.4%.
The pound was quoted at $1.2632 at midday on Wednesday in London, higher compared to $1.2590 at the equities close on Tuesday. The euro stood at $1.0769, up against $1.0749. Against the yen, the dollar was trading at JP¥148.09, unchanged from a day earlier.
Barratt Development plunged 6.8% to the bottom of the FTSE 100 index on Wednesday around midday, while Redrow was the FTSE 250’s best performer up 13%.
Barratt said it will be taking over its smaller peer Redrow, in an all-share takeover offer which values Redrow at £2.52 billion.
Each Redrow shareholder will receive 1.44 new Barratt shares for each Redrow share. Following completion, shareholders in Redrow will hold around 33% of the combined group, while Barratt shareholders will hold around 67%.
The combined group will be renamed Barratt Redrow PLC upon completion.
Separately, the two firms announced results for the six months ended December 31. Both slashed dividends amid lower profit and revenue.
Barratt reported that revenue in the period fell 34% to £1.85 billion from £2.78 billion a year earlier. Pretax profit plummeted 70% to £157.1 million from £521.5 million.
In response to the lower profit, Barratt slashed its interim dividend to 4.4p from 10.2p.
In the same period, Redrow said its own revenue fell to £756 million from £1.03 billion a year earlier. Pretax profit fell to £84 million from £198 million.
Redrow halved its interim dividend to 5.0p from 10.0p.
‘When an industry faces a difficult time consolidation is often the result and the proposed takeover of Redrow by Barratt Developments is evidence of that,’ said AJ Bell analyst Russ Mould.
Other FTSE 100 housebuilders trading higher, with Taylor Wimpey and Persimmon up 1.1% and 0.2%, respectively, amid signs that the UK housing market is heating up.
Data from Halifax showed that UK house prices rose for the fourth consecutive month in January, indicating a recovery in the sector.
The Halifax house price index rose 1.3% on a monthly basis in January, after rising by 1.1% in December. The typical UK home cost £291,029 in January, up £3,924 compared to December.
Kathleen Brooks, research director at XTB, said the data shows ‘further evidence that the UK economy started 2024 on a new leaf’.
Smurfit Kappa jumped 4.9%.
The Dublin-based packaging company reported revenue in the 12 months to December 31 fell 12% to €11.27 billion from €12.82 billion the year prior, with pretax profit down 18% to €1.06 billion from €1.29 billion. Basic earnings per share declined 20% to 293.5 euro cents from 365.3 cents.
Earnings before interest, tax, depreciation and amortisation fell 12% to €2.08 billion from €2.36 billion while the return on capital employed dipped to 17.1% from 21.8%.
Chief Executive Tony Smurfit said the results were ‘the second best in our 90-year history,’ with Ebitda and return on capital employed ‘above our target’.
Smurfit boosted its dividend by 10% to 118.4 euro cents.
In the FTSE 250 index, PZ Cussons dropped 17%, after it cut its dividend and lowered profit guidance.
The Manchester, England-based consumer goods company which owns brands such as Carex and Imperial Leather said, in the half-year ended December 2, revenue fell 18% to £277.1 million from £336.9 million the year prior. The firm reported a pretax loss of £94.2 million, swinging from a pretax profit of £40.5 million the year before.
As a result, PZ Cussons cut its dividend by 44% to 1.50p from 2.67p, saying it would not be ‘prudent’ to make an unchanged payout.
Looking ahead, PZ cussons said it now expects full-year adjusted operating profit, at reported rates of exchange, to be in the range of £55 million to £60 million compared to a range of £61.5 million to £68.2 million given in September.
On London’s AIM, Redx Pharma surged 50%, after it struck a deal to sell its Kirsten rat sarcoma virus inhibitor programme to Dublin-based Jazz Pharmaceuticals.
The Macclesfield, England-based clinical-stage biotechnology company said it will receive $10 million upfront, with a potential for up to $870 million in development, regulatory and sales milestone payments in addition to royalties on future net sales.
Elsewhere, US Secretary of State Antony Blinken met Israeli Prime Minister Benjamin Netanyahu in Jerusalem on Wednesday to push for a ceasefire as the Gaza war enters its fifth month.
Israel and Hamas have been weighing a proposal, brokered by US, Qatari and Egyptian mediators, that would be expected to temporarily halt the fighting and see Gaza hostages freed and Palestinian prisoners released.
Brent oil was quoted at $79.03 a barrel at midday in London on Wednesday, up from $78.57 late Tuesday.
Stocks in New York were called to open mostly lower. Both the Dow Jones Industrial Average and the S&P 500 index are called down 0.1%, whilst the Nasdaq Composite is called to open flat.
Gold was quoted at $2,033.12 an ounce midday Wednesday, lower against $2,036.43 late Tuesday.
Still to come on Wednesday’s economic calendar, there is US trade balance data at 1330 GMT.
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