London close: Stocks firmer on eve of BoE decision
London stocks closed above the waterline on Wednesday, having taken their cue from an upbeat session on Wall Street overnight, as investors prepared for policy announcements from the Bank of England and the European Central Bank on Thursday.
The FTSE 100 ended the session up 0.63% at 7,583.00, and the FTSE 250 was 0.37% firmer at 22,249.40.
Sterling was also in the green against its major trading pairs, last gaining 0.33% on the dollar to $1.3566, and changing hands 0.06% firmer on the euro at €1.2004.
“European stock markets are set to finish higher again as the upbeat mood continues,” said Equiti Capital market analyst David Madden.
“Indices have been gaining ground this week as traders are in recovery mode - DAX and the FTSE 100 hit two-week highs as worries about a potential conflict in eastern Europe have diminished, even though the political atmosphere remains tense.
“US index futures were showing solid gains a few hours ago, but the S&P 500 is now only up 0.4% as the latest employment data dented sentiment a little.”
In economic news from across the pond during the afternoon, private sector employment in the United States fell unexpectedly in January, amid a surge in Covid-19 infections.
According to ADP, employment declined by 301,00 from December, against expectations for a 207,000 jump.
Meanwhile, the December total of jobs added was revised from 807,000 to 776,000.
“The labour market recovery took a step back at the start of 2022 due to the effect of the Omicron variant and its significant, though likely temporary, impact to job growth,” said Nela Richardson, chief economist at ADP.
“The majority of industry sectors experienced job loss, marking the most recent decline since December 2020.
“Leisure and hospitality saw the largest setback after substantial gains in fourth quarter 2021, while small businesses were hit hardest by losses, erasing most of the job gains made in December 2021.”
Equiti’s Madden said the reading indeed caught traders by surprise, with it being the worst reading since May 2020.
“The report was a reminder that the figure can be negative as well as positive.
“As the saying goes, ‘one swallow doesn’t make a spring’ and by the same token, one poor ADP reading doesn’t mean the recovery is over,” Madden explained.
“It is possible ‘the great resignation’ is behind the explanation rather than employers cutting jobs.”
On home shores, a survey released earlier showed the rate of price rises in UK shops almost doubled in January, adding to pressure on the cost of living, with more increases to come.
Shop-price annual inflation accelerated to a near-decade high of 1.5% from 0.8% a month earlier, the British Retail Consortium's survey showed.
The rate of increase was higher than the six-month average rise of 0.1% and was the highest since December 2012.
“The rise in shop prices is playing into wider UK inflation, which is pushing cost of living to the forefront of the political agenda,” said Helen Dickinson, the BRC's chief executive.
“Many households will find it difficult to absorb the additional costs, as well as others on the horizon.
“As commodity prices, energy prices and transportation costs continue to rise, it is inevitable that retail prices will continue to follow.”
Still on the cost of living crisis, it emerged that the government was preparing to announce a rebate on energy bills, just one day before Ofgem announces how much the price cap will rise by.
The energy regulator said on Wednesday that it was bringing forward the announcement on the price cap from 7 February and would now publish its decision at 1100 GMT on Thursday.
In response, the government, which was currently mired in scandal over the numerous parties held at Downing Street during lockdown, had reportedly agreed a so-called "rebate and clawback" scheme.
Under the terms of the scheme, taxpayers would underwrite loans to energy firms, which in turn would pass the money on to households in the form of a one-off rebate on their energy bill.
The energy companies would recoup the rebates from customers in subsequent years, allowing them to pay back the loans as energy prices receded.
In equity markets, online grocer and warehousing technology developer Ocado jumped 5.7% after a double upgrade to ‘outperform’ by Credit Suisse, while motor sales platform Auto Trader rallied 2.43% after an upgrade to ‘buy’ from ‘hold’ at Jefferies.
Telecoms giant Vodafone Group gained 3.41% after it reported higher third-quarter services revenue, driven by growth in Europe and Africa as it reiterated annual guidance.
Gambling software group Playtech reversed earlier losses to close up 1.39%, after it said it was unlikely shareholders would approve a takeover offer by Australia’s Aristocrat Leisure based on proxy counts, and that it was looking at "attractive alternatives" if the deal collapsed.
Molten Ventures, formerly Draper Esprit, was also on the rise, adding 3.44% after the venture capital firm backed its year-end guidance of fair value growth of around 35%.
In an investment update, Molten pointed to continued momentum in deal activity, with £259m invested over the year to date, including 12 primary deals and 15 follow-ons.
It also noted "strong" revenue growth across its portfolio companies through 2021 and said this was expected to continue in 2022.
On the downside, Chilean copper miner Antofagasta lost 5.69% after a top policymaker in Chile indicated that the government would need to raise taxes amid concerns about inflation.
BAE Systems was in the red by 1.41% after a rating downgrade at JPMorgan.
Harbour Energy was also under pressure, losing 5.53% after it said Phil Kirk planned to step down as executive director, president and chief executive of European operations at the end of the month.
Market Movers
FTSE 100 (UKX) 7,583.00 0.63%
FTSE 250 (MCX) 22,249.40 0.37%
techMARK (TASX) 4,462.09 0.70%
FTSE 100 - Risers
Ocado Group (OCDO) 1,501.50p 5.70%
Vodafone Group (VOD) 132.32p 3.41%
Barratt Developments (BDEV) 629.40p 2.61%
NATWEST GROUP PLC ORD 100P (NWG) 252.90p 2.43%
Auto Trader Group (AUTO) 692.00p 2.43%
Croda International (CRDA) 8,180.00p 2.35%
Rentokil Initial (RTO) 523.40p 2.27%
Abrdn (ABDN) 245.70p 2.12%
Experian (EXPN) 3,212.00p 2.04%
Intermediate Capital Group (ICP) 1,955.50p 1.98%
FTSE 100 - Fallers
Antofagasta (ANTO) 1,284.00p -5.69%
International Consolidated Airlines Group SA (CDI) (IAG) 157.62p -2.16%
Fresnillo (FRES) 640.00p -1.97%
InterContinental Hotels Group (IHG) 4,875.00p -1.87%
Rolls-Royce Holdings (RR.) 115.20p -1.72%
JD Sports Fashion (JD.) 188.30p -1.62%
BAE Systems (BA.) 570.80p -1.41%
Kingfisher (KGF) 331.00p -1.08%
Scottish Mortgage Inv Trust (SMT) 1,105.50p -1.07%
BP (BP.) 389.55p -0.95%
FTSE 250 - Risers
Discoverie Group (DSCV) 877.00p 4.85%
Bytes Technology Group (BYIT) 488.00p 4.81%
Future (FUTR) 3,408.00p 3.84%
Tate & Lyle (TATE) 731.00p 3.69%
Molten Ventures (GROW) 811.00p 3.44%
Diploma (DPLM) 2,884.00p 3.28%
Centrica (CNA) 76.66p 3.18%
Bridgepoint Group (Reg S) (BPT) 392.00p 3.16%
Telecom Plus (TEP) 1,576.00p 3.02%
Virgin Money UK (VMUK) 195.90p 3.00%
FTSE 250 - Fallers
Hipgnosis Songs Fund Limited C Shs NPV (SONC) 112.50p -100.00%
Harbour Energy (HBR) 345.20p -5.53%
Energean (ENOG) 916.00p -3.99%
Contour Global (GLO) 188.40p -3.95%
Network International Holdings (NETW) 257.00p -3.80%
Watches of Switzerland Group (WOSG) 1,268.00p -3.50%
TUI AG Reg Shs (DI) (TUI) 254.40p -3.38%
Syncona Limited NPV (SYNC) 193.60p -3.10%
SSP Group (SSPG) 268.60p -3.00%
WH Smith (SMWH) 1,643.00p -2.84%