Stock markets and the dollar were firm on Wednesday in the lead-up to the minutes of the most recent US Federal Reserve meeting, which traders hope will give clues to the future pace of interest rate hikes.

Weakness in the pound was supporting the FTSE 100 index since many of its members bill in dollars.

SSE fronted a revival for London-listed utilities stocks, which had slipped on Tuesday after coming into the crosshairs of possible UK windfall tax plans. A warning from Ocado put it at the bottom of the FTSE 100.

The index was up 46.84 points, or 0.6%, at 7,531.19 midday Wednesday. The mid-cap FTSE 250 index was up 54.77 points, or 0.3%, at 19,904.59. The AIM All-Share index was down just 2.45 points, 0.3%, at 952.84.

The Cboe UK 100 index was up 0.6% at 750.57. The Cboe 250 was up 0.1% at 17,630.44, and the Cboe Small Companies was 0.2% lower at 14,575.68.

In mainland Europe, the CAC 40 in Paris was up 0.3% in early afternoon trade, while the DAX 40 in Frankfurt was up 0.4%.

AJ Bell analyst Russ Mould noted that it was ‘utilities, telecoms and mining stocks – all generous dividend payers’, leading the way in the FTSE 100 on Wednesday.

‘People are continuing to rediscover their love of income investments,’ the analyst added.

Vodafone added 2.3%, Anglo American rose 2.5% and SSE climbed 6.2%.

Utility SSE reported a sharp rise in annual profit, thanks to high oil and gas prices, and said it is on the path to hitting its strategic capital investment target.

In the financial year that ended March 31, revenue climbed 42% to £16.91 billion from £11.87 billion. Pretax profit rose 44% to £3.48 billion from £2.42 billion.

SSE said it is on track to complete £12.5 billion in strategic capital investment by financial 2026.

SSE lifted its payout by 5.8% to 85.7p from 81.0p.

The company’s annual results came in the wake of a Financial Times report on Monday that said UK Chancellor Rishi Sunak is mulling a windfall tax on more than £10 billion of excess profit achieved by electricity generators.

Calls for a windfall tax, particularly on oil majors such as BP and Shell, have intensified as the UK cost of living crisis worsens, and clubbing in electricity generators such as SSE, RWE and Iberdrola’s Scottish Power would boost the revenue such a levy could bring.

Stocks which succumbed to windfall tax fears on Tuesday were on the up on Wednesday. Drax added 5.6%, while British Gas-owner Centrica climbed 4.2%.

Elsewhere in London, Ocado slipped 4.4% after cutting sales growth guidance.

It now expects just ‘low single digit’ annual sales growth from its retail joint-venture, as grocery buying behaviour normalises and consumer confidence weakens.

The Hatfield, Hertfordshire-based online grocer warned the Ocado Retail joint-venture, operated alongside Marks & Spencer, has suffered in recent weeks as its trading environment has ‘deteriorated’.

Annual growth at the JV will now be ‘in the low single digits’, the forecast lowered from a 10% climb. Ocado ends its financial year around late November.

Partner M&S was trading 0.2% lower. The high-street retailer reported a swing to annual profit for its recently ended financial year, but cautioned on its bottom line in the year ahead amid the war in Ukraine and investment plans.

On the up in the retail sector, meanwhile, was Pets At Home, jumping 10%.

Pretax profit for the financial year March 31 rose 40% to £148.7 million from £106.3 million a year ago. Revenue climbed to £1.32 billion from £1.14 billion.

The animal products retailer vowed to keep prices competitive despite cost pressures. The company said it is ‘not immune to current industry-wide inflationary pressures, in particular the impact of raw material, energy and freight costs’.

But it added: ‘We have clear plans in place to keep our pricing competitive for customers, while doing everything we can to reduce our own costs.’

Randall & Quilter tumbled 37% after suitor Brickell PC Insurance Holdings alleged the company is in breach of an implementation agreement. As a result, Brickell is moving to exercise its right to cancel its acquisition of R&Q

R&Q for its part said it does not agree that it has committed any breaches and believes Brickell does not have the right to cancel the deal.

R&Q accepted a £482 million takeover by Brickell back in April. R&Q now has a market capitalisation of £240.2 million following Wednesday’s share price slide.

The minutes of the US Federal Reserve’s policy meeting earlier this month will be released at 1900 BST.

Ahead of the release, New York equity market futures were flat to marginally higher, while the dollar was largely on the up.

The Dow Jones Industrial Average was called flat, the S&P 500 up 0.1% and the Nasdaq Composite up 0.2%.

The pound fell to $1.2494 around midday in London on Wednesday, from $1.2518 at the London equities close on Tuesday. The euro slipped to $1.0665 from $1.0725. Against the yen, the dollar advanced to JP¥127.12 from JP¥126.67.

At its most recent meeting, the Fed decided to raise interest rates by 50 basis points, as expected.

It was the first time the US central bank had hiked rates by a half-point in one step since 2000, and it took the federal funds rate to a range of 0.75% to 1.00%.

‘The US dollar is gaining ground on its peers during early Wednesday trading. Since mid-May the greenback gave up some of the gains that had seen it reaching an almost 20-year maximum in relation to other major currencies. Fears of a recession triggered by excessive tightening of monetary policies gave investors reasons to question if the Fed’s determination to combat inflation would start to fizzle-out,’ ActivTrades analyst Ricardo Evangelista commented.

‘Today’s release of the May’s FOMC minutes will provide more clues on how policymakers stand in relation to the issue of fighting inflation versus supporting economic growth – and while still unlikely, should any significant signs of dovishness emerge from the FOMC minutes, the dollar could give up more of the gains accumulated since the beginning of the year.’

Also still to come on the economic events calendar on Wednesday are US durable goods orders at 1330 BST.

On the UK political front, a long-awaited report on what has been dubbed as ‘partygate’ was published.

Civil servant Sue Gray said the ‘senior leadership at the centre, both political and official, must bear responsibility’ for a culture which allowed a series of controversial events to happen, while parts of the UK were subject to Covid-19 lockdowns.

‘The events that I investigated were attended by leaders in government. Many of these events should not have been allowed to happen. It is also the case that some of the more junior civil servants believed that their involvement in some of these events was permitted given the attendance of senior leaders,’ Gray said.

UK Prime Minister Boris Johnson, one of those at the heart of the investigation, will address parliament later Wednesday. The customary Prime Minister’s Question Time takes place at midday.

Brent oil rose to $114.83 a barrel midday Wednesday from $113.97 late Tuesday. Gold stood at $1,855.39 an ounce, down from $1,866.09.

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Issue Date: 25 May 2022