HSBC tower
HSBC shares decline after analysts at Barclays cut stock rating / Image source: Adobe

Equities in London went into Wednesday afternoon in largely negative territory, though peers in Europe were in the green and equities in New York are called higher.

Nonetheless, there was still some trepidation in the air ahead of a US inflation reading on Friday.

Some of the FTSE 100’s heavyweights weighed on the index. Shell and BP fell 1.3% and 1.5% as Brent prices fell. HSBC lost 1.7% after Barclays cut the stock to ’equal weight’.

The FTSE 100 index was down 24.66 points, 0.3%, at 7,906.30. The FTSE 250 was down 50.36 points, 0.3%, at 19,727.28, and the AIM All-Share was up just 0.10 of a point at 739.62.

The Cboe UK 100 was down 0.3% at 790.83, the Cboe UK 250 was down 0.2% at 17,138.00, and the Cboe Small Companies was up 0.2% at 14,646.40.

In European equities on Wednesday, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was up 0.4%.

Sterling was quoted at $1.2636 at midday Wednesday, lower than $1.2655 at the London equities close on Tuesday. The euro traded at $1.0826, lower than $1.0850, while against the yen, the dollar was quoted lower at JP¥151.04 versus JP¥151.34.

The latest core personal consumption expenditures reading, the Fed’s preferred inflation gauge, is released on Friday. Financial markets across the globe, including in London and New York, will be closed that day for Good Friday, however.

According to FXStreet cited consensus, the rate of core PCE inflation is expected to have been unmoved at 2.8% in February. The headline rate is expected to have picked up to 2.5% in February, from 2.4% in January.

‘It’s worth emphasizing that the month-to-month readings need to cool down. This cooling is crucial because if they don’t, disinflation against the 12-month readings, which the Fed uses to gauge progress, may halt and potentially reverse. Indeed, the fact that 2.8% is only 0.2% above the year-end median in the new summary of economic projections isn’t particularly comforting,’ said SPI Asset Management analyst Stephen Innes.

‘It indicates that the Fed doesn’t anticipate significant progress in disinflation for the rest of 2024, despite their intention to cut rates three times during this period. Hence, It’s understandable why investors are feeling anxious about the upcoming data releases, as there is not much margin to miss here.’

Stocks in New York were called to open higher. The Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite were all called up 0.4%.

In London’s FTSE 100, Diploma was the top performing stock, soaring 11%, after announcing the proposed acquisition of Peerless Aerospace Fastener, a distributor of specialty fasteners into the US and European aerospace markets, for around £236 million.

The London-based supplier of specialised technical products and services said it expects the transaction to complete in the next few weeks, following customary regulatory clearances.

DS Smith rose 8.4%. After the market close on Tuesday, DS Smith confirmed that it was in talks with International Paper, regarding a possible all share takeover offer.

Under the terms of the proposal, DS Smith shareholders would receive 0.1285 shares in International Paper for each share they own in DS Smith.

Based on International Paper’s share price of $40.85 at close of business on Monday, the terms represent a value of 415 pence per share. This would value DS Smith at around £6.2 billion.

Talks would Mondi would also continue.

Earlier this month, Mondi and DS Smith agreed a deal in principle which valued each share in DS Smith at 373p.

Mondi shares were 0.9% higher.

Sainsbury’s rose 2.9%, after UBS raised its rating for the supermarket to ’buy’ from ’neutral’, setting an improved target price of 295 pence from 275p. Its current share price is 269.3p.

AstraZeneca rose 1.6%, after the pharmaceutical firm announced two drug approvals in Japan.

In collaboration with Sanofi, the pharmaceutical firm’s Beyfortus treatment was approved for the treatment of lower respiratory tract disease caused by respiratory syncytial virus in infants and children.

AstraZeneca expects Beyfortus to be available for the upcoming 2024/25 RSV season, in line with existing Japanese guidelines.

Meanwhile, its Truqap treatment in combination with Faslodex has also been approved in Japan for the treatment of adult patients with various forms of breast cancer after treatment with hormone therapy.

In the FTSE 250, Ithaca Energy rose 2.7%.

The London-based North Sea oil and gas operator signed an exclusivity agreement with Eni for a ‘potential transformational combination’ with substantially all of Eni’s UK upstream assets. Eni has granted Ithaca Energy exclusivity for a period of four weeks from today.

AJ Bell analyst Russ Mould commented on the Eni deal: ‘Ithaca Energy may talk about reducing investment in the UK North Sea thanks to the energy profits levy, but its actions and words are somewhat at odds given the announcement of a proposed share-based deal with Italy’s Eni to acquire the latter’s UK oil and gas fields.

‘This deal makes Ithaca the second-largest operator in the region and leaves Eni with a near-40% stake in the group. That said, disquiet in the industry at the way companies have been treated by the Treasury is real, with the lack of consistency, as much as the absolute rate of tax, a bone of contention in the sector.’

Among London’s small-caps, Vanquis Banking rose 9.3%. The Bradford, England-based lender swung to a pretax loss in 2023 of £4.4 million from a profit of £110.1 million in 2022.

This was despite net interest income rising 2.3% to £442.6 million from £432.7 million, and total income rising 1.7% to £488.8 million from £480.7 million.

Impairment charges more than doubled to £166.1 million from £66.1 million, while operating costs rose 7.4% to £327.1 million from £304.5 million.

Shares are still some 75% lower over the past 12 months, however. It had suffered a 50% plunge on March 11 when it warned income and pretax profit in 2024 would be substantially below market expectations.

CMC Markets shot up 15%.

The London-based online trading platform operator for retail investors and financial institutions expects net operating income in the financial year ending Sunday to exceed the top end of the previously guided range of between £290 million and £310 million.

It also expects operating costs to be in line with guidance at around £240 million, while noting it continues to identify opportunities for further cost savings across the global business as it focuses on improving profit margins.

Asos lost 1.9%, giving back gains from Tuesday, when it backed its yearly outlook after reporting progress on its stock clearing efforts, although half-year sales declined.

Meanwhile, on Wednesday both Asos and boohoo promised to make ‘accurate and clear’ environmental claims for their fashion items, following a probe by the UK Competition & Markets Authority.

The duo’s pledge, also made by Asda’s George offering, will mean consumers ‘can now expect to see accurate and clear green claims when shopping for fashion items’, the UK watchdog explained.

‘The undertakings secured by the Competition & Markets Authority commit Asos, Boohoo and George at Asda - which together make over £4.4 billion annually from UK fashion sales alone - to change the way they display, describe, and promote their green credentials,’ the CMA added, also noting that all three retailers made these undertakings ‘without any admission of wrongdoing or liability’.

boohoo rose 2.3% on AIM in London.

Gold was quoted at $2,196.28 an ounce at midday Wednesday, higher than $2,171.90 on Tuesday. Brent oil was trading at $85.13 a barrel, lower than $86.00 late Tuesday.

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Issue Date: 27 Mar 2024