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FTSE 100 recovers from worst levels, Wall Street expected to open flat

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  • FTSE 100 down 9 points
  • Wall Street likely to be virtually unchanged
  • Housebuilders slip despite price rises

12.50pm: Wall Street wary of inflation

After endng higher on Tuesday, Wall Street is expected to open fairly flat despite concerns about inflation beginning to weigh.

The Dow Jones Industrial Average is forecast to edge slightly lower at 31,485 while the S&P 500 is  likely to be virtually unchanged at 3927.

US mortgage applications were down 5% last week, with buyers said to be put off by rising rates. Later come January retail sales figures which are forecast to show a rebound after sharp falls in the previous two months. With a consumer slowdown and the political deadlock over a proposed stimulus package, retail sales fell by 1.1% month on month in November and 0.7% in December. A rise of 1% is now expected for January.

Michael Hewson at CMC Markets said: “Since [November and December] the economic data has picked up markedly, helped in some part by the new $900bn stimulus plan that was agreed at the end of last year, and expectations over another $1.9trn later this quarter. This optimism is likely to translate into a rebound in consumer confidence and ergo a possible rebound in consumer spending, after a disappointing Thanksgiving and Christmas spending period. Expectations are for a 1% recovery to start the year, which could well continue into the rest of the first quarter.”

US producer prices and the minutes of the last Federal Reserve meeting will also be scrutinised for signs of inflation, especially after the higher than expected UK figure.

Meanwhile the FTSE 100 is down 9.81 points or 0.15% at 6739.05.

12.12pm: BP and Shell boosted by strong oil price

Despite the FTSE 100 remaining in the doldrums, oil companies are benefitting from the strength in the crude price.

With Brent up 1.26% at $64.15 a barrel, BP PLC (LON.BP) is 1.89% or 5.25p better at 283.45p and Royal Dutch Shell PLC (LON.RDSB) has seen its B shares climb 26.6p or 1.94% to 1395.8p.

Craig Erlam, senior market analyst at OANDA Europe said: “Oil prices are climbing once more, with the cold snap in Texas the latest bullish catalyst for crude prices. With oil wells and refineries offline, we could be facing a significant shortfall for a number of days, further tightening supply at a time when it has already been restricted and demand is expected to return.

“This is only a short-term glitch though which is why we’re not seeing a more signficiant impact on oil prices, which are starting to show signs of being overbought. This shouldn’t come as a major shock after a 70% rally since early November. A lot of optimism around the economic recovery is now priced in so the market may be primed for a minor correction.”

The rise in oil companies has not stopped the FTSE 100 dipping 13 points or 0.19% to 6736.05,

With the next reshuffle due on March 3, some of the newly listed businesses could make their mark, Dr Martens PLC (LON.DOCS) for one.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’Three newly listed star players are leading contenders to land coveted FTSE positions in the upcoming re-shuffle. Dr Martens is set to stomp into the FTSE 250 but has an has outside chance of taking the next step into the FTSE 100 after a rip roaring IPO. Tech newcomers Moonpig and The Bytes Group have also floated into potential FTSE 250 territory.

“Close to losing its FTSE 100 crown is South West Water owner Pennon Group, which has seen interest trickle away as it sits on a pretty cash pile but lacks a sense of direction. Weir Group has a chance of swimming back upstream to the FTSE 100 as its strategic shift towards mining pays off.”

The suggestion has done little for Dr Martens price though, down 1.27% or 6.4p to 498.6p.

10.45am: Housebuilders slip despite jump in prices

Worries about inflation after the earlier higher than expected UK figures continue to leave the market lagging, with the FTSE 100 down 19.02 points or 0.28% at 6729.84.

Joshua Mahony, senior market analyst at IG, said: “European markets are heading lower in early trade, with anxiety growing over how inflation could gradually undermine this recovery phase. Market sentiment remains underpinned by vaccination, reopening, and stimulus expectations, yet we are seeing an element of fear creep in as inflation expectations impact the potential monetary policy outlook

“In the UK, housing stocks failed to take advantage of a sharp rise in house prices, with the official HPI for December seeing a 8.5% rise over the course of the year. That comes as market fear what could be forthcoming as the surge in deals ahead of the stamp duty holiday deadline dry up.”  

So Taylor Wimpey PLC (LON.TW) is down 1.87% or 3.1p at 162.5p and Bellway PLC (LON.BWY) has fallen 79p or 2.6% at 2963p.

9.28: Mining shares give some support to FTSE 100

The FTSE 100 remains in negative territory but mining shares are providing some support after decent results from Rio Tinto PLC (LON.RIO).

The group – which has run into controversy in recent months after dynamiting heritage areas at its Pilbara mine to access iron ore – reported a 3% rise in full year revenues. Iron ore revenues, as it happens, jumped 14%. The company has also lifted its dividend by 26%, helping its shares to climb 202p or 3.2% to 6462p and making it the top riser in the leading index.

Analyst Nicholas Hyett at Hargreaves Lansdown said: “Rio has continued the recent trend in mining majors, with bumper results driven by high levels of efficiency and rising commodity prices. However, the destruction of historic aboriginal sites in Australia has marred what would otherwise be a very good year for the group – ultimately costing the company much of its senior management team.

“Iron ore has been the standout performer, and since that remains Rio’s bread and butter, that has turbo charged results at the group level. Higher cash flows and some caution on shareholder returns means net debt has tumbled and the balance sheet looks in excellent shape to fund a planned uptick in capital expenditure….but the juggling act between investing in growth and preparing for tougher times is a difficult one.”

Nevertheless the Rio results have boosted the whole sector, with Antofagasta PLC (LON.ANTO) adding 46p or 2.8% to 1682p, BHP PLC (LON.BHP) (which reported positive results on Tuesday) 1.6% or 37.5p better at 2298p and Anglo American PLC (LON.AAL) up 1.6% or 45p at 2863.5p.

That is not enough to drag the FTSE 100 out of the red, with the index down 14.06 points or 0.21% at 6734.8.

8.32am: FTSE slips after inflation ticks up

The FTSE 100 began where it ended on Tuesday – in the red as inoculation and stimulus optimism fizzled.

The latest inflation data was never going to change sentiment, even if consumer prices rose by a marginally faster than expected 0.7% in January, pushed up by higher food and household goods costs.

“Inflation has started 2021 in much the same vein as it finished 2020, low and moving sideways,” said Laith Khalaf, analyst at AJ Bell.

“The fact that restaurants and hotels provided a large upward pressure on CPI, despite largely being shuttered in January, provides ample cause for caution when interpreting broad economic indicators in a world where activity has been so horribly distorted by lockdown.

“The January price variation of some common food items like cauliflowers, crisps and fish fingers suggests there may have been some temporary Brexit disruption at play too.”

Premier Foods (LON:PFD), the owner of the Angel Delight and Bisto brands (among a host of others), rose 4.3% in the wake of the data.

Up a flight on the Footsie, British American Tobacco (LON:BAT) was headed in the opposite direction. It lost 5.2% after its prelims apparently missed market expectations.

The funds supermarket, Hargreaves Lansdown (LON:HL.), was down 6.2% after founder Peter Hargreaves sold £300mln-worth of shares.

Proactive news headlines

Molecular diagnostics specialist Genedrive PLC (LON:GDR) said it has made the first US shipments of its 96 SARS-CoV-2 Covid PCR kits following the completion of commercial and technical training with sales staff from partner Beckman Coulter.

Open Orphan PLC (LON:ORPH) shares rose on Wednesday as the company said the world’s first coronavirus (COVID-19) characterisation study has received approval from a specially convened Research Ethics Committee (REC) following a contract received by the company’s subsidiary hVIVO from the UK government to develop a COVID-19 human challenge study model.

Evgen Pharma PLC (LON:EVG) said 102 patients have been recruited and randomised as part of the STAR trial for its COVID-19 treatment.

Silence Therapeutics PLC (LON:SLN, NASDAQ:SLN) said it has begun dosing patients with SLN360, a putative treatment for elevated Lipoprotein (a), ‘bad’ cholesterol associated with increased risk of heart disease.

Ceres Holdings PLC (LON:CWR) said revenues in its upcoming results would beat market expectations. 

Seneca Global Income & Growth Trust PLC (LON:SIGT) said it will maintain its dividend at the current level at least until April 2022. Following the takeover of its manager Seneca, the company’s name will be changing to Momentum Multi-Asset Value Trust PLC.

DeepVerge PLC (LON:DVRG) said it has signed contractual obligations for the production of water contamination equipment worth around (US$5mln) £3.6mln off the back of its acquisition of Modern Water in November.

Supermarket Income REIT PLC (LON:SUPR) has acquired a Sainsbury’s supermarket in Bangor, County Down, for £24.8mln – its first deal in Northern Ireland.

Emmerson PLC (LON:EML) told investors it is now assessing a staged development for its Khemisset potash project, in Morocco, with a move that would reduce upfront costs whilst significantly expanding the envisaged life-of-mine production volumes.

Ariana Resources PLC (LON:AAU) has completed what it describes as a transformational joint venture deal in Turkey, with Özaltin and Proccea Construction.

Mosman Oil and Gas Ltd (LON:MSMN) updated on the recently recompleted Stanley-1 well and the Falcon-1 well in Texas, where weather conditions are impacting operations.

Greencoat UK Wind PLC (LON:WIND) has brought in £198mln of new capital, in an oversubscribed placing, as it advances a strong pipeline of acquisition opportunities.

Landore Resources Ltd (LON:LND) confirmed overnight that it has raised £3.5mln of cash to complete further drilling at the BAM Gold project in Ontario and undertake further studies.

Oracle Power PLC (LON:ORCP) notified that it has received a notice of exercise in respect of certain pre-existing warrants to subscribe for a total of 6mln new ordinary shares at a price of 0.25p per share. The exercise of these warrants amounts to an aggregate cash subscription of £15,000.

Advanced Oncotherapy (LON:AVO) announced that it has received a warrant exercise notice in respect of 500,000 new ordinary shares with an exercise price of 25p per share. Proceeds of £125,000 have been received.

Live Company Group PLC (LON:LVCG) said that non-executive director Simon Horgan will step down from the board with immediate effect for personal reasons. The board now consists of David Ciclitira, chair; Serenella Ciclitira, Bryan Lawrie and Ranjit Murugason as non-executive directors, with non-board directors including Sarah Dees as chief operating officer and Richard Collett as chief financial officer.

EQTEC PLC (LON:EQT) announced that at its extraordinary general meeting today, all resolutions put to the meeting were duly passed.

Argo Blockchain PLC (LON:ARB) told investors that it will today publish a notice of general meeting with related explanatory circular and form of proxy. The notice and circular contain resolutions to approve the issuance of new shares, which will be put to shareholders at a general meeting at 10am on 5 March 2021. Due to UK government restrictions, the meeting will be run as a closed meeting and shareholders will need to vote by proxy.

Litigation Capital Management Limited (LON:LIT) said it will announce its interim results for the six months to 31 December 2020 on Tuesday 16 March 2021. A webinar presentation for analysts will take place at 9am on the day. A recording of the event will subsequently be made available on the company’s website.

6.55 am: Flat start predicted 

The FTSE 100 is expected to start Wednesday’s session on the front foot as traders await the latest batch of UK inflation data.

Spread-betters IG expect the blue-chip index to open up 18 points after ending Tuesday’s session down 7 points at 6,748.

“In recent months headline CPI numbers have fallen below the radar a little, however given the sharp rise in 10-year yields since the start of this year in the US, as well as here in the UK, fears over a sustained rise in inflation is starting to stalk the markets”, said Michael Hewson at CMC Markets.

“This rise in prices isn’t expected to manifest itself in today’s January numbers, however the headline CPI numbers could start to get more interesting as the year progresses. Expectations are for UK inflation to slip back to 0.5% from 0.6% with core prices also set to decline to 1.3%, from 1.4%”, he added.

Traders may also be keeping an eye on the latest batch of minutes from the Federal Reserve, which are due to be released later today.

Predictions for a positive FTSE 100 open followed a mixed performance for US markets overnight, with the Dow Jones Industrial Average closing up 0.2% at a record high of 31,522 while the S&P 500 dropped 0.06% to 3,932 and the Nasdaq fell 0.34% to 14,047.

The picture was also mixed in Asia this morning, with Japan’s Nikkei 225 falling 0.58% while Hong Kong’s Hang Seng was up 0.99%.

On currency markets, the pound was down around 0.17% against the dollar at US$1.388, although the inflation data could provide some catalysts for movement.

Around the markets:

Sterling: US$1.388, down 0.17%

Brent crude: US$63.54 a barrel, up 0.3%

Gold: US$1,789 an ounce, down 0.03%

Bitcoin: US$50,005, up 2.8%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Wednesday as Japan’s exports rose 6.4% in January compared to a year earlier, according to trade statistics released by the country’s Ministry of Finance.

The Hang Seng index in Hong Kong surged 1.19% while Mainland China’s markets were closed for the Lunar New Year holidays.

In Japan, the Nikkei 225 shed 0.58% and South Korea’s Kospi slipped 0.89%.

Shares in Australia fell, with the S&P/ASX 200 closing 0.46% lower.

READ OUR ASX REPORT HERE

Proactive Australia news:

PVW Resources Limited (ASX:PVW) made an encouraging debut on the ASX today, opening at 16 cents and trading up to 20.5 cents.

OAR Resources Ltd’s (ASX:OAR) (FRA:F1S) results from maiden aircore drilling at its 100%-owned Gibraltar Halloysite Project on the Eyre Peninsula of South Australia, confirm the presence of kaolinite in all holes sampled and high-value halloysite in 24 of the 59 holes drilled.

Northern Minerals Ltd‘s (ASX:NTU) (OTCMKTS:NOURF) (FRA:NUN) final results from its 2020 rare earth exploration and resource definition drilling campaign at the Browns Range Project in Western Australia support the potential for growth in resources.

Vango Mining Ltd (ASX:VAN) has received encouraging gold results from diamond drilling at Ned Creek’s Project in Western Australia’s Murchison region where it is spending $5 million over a three-year period to earn a 51% interest from Lodestar Minerals Limited (ASX:LSR).

Core Lithium Ltd’s (ASX:CXO) (OTCMKTS:CXOXF) rotary air blast (RAB) drilling has found gold mineralisation beneath the newly-discovered Far East belt at its wholly-owned Bynoe Gold Project in the Northern Territory.

OAR Resources Ltd’s (ASX:OAR) (FRA:F1S) results from maiden aircore drilling at its 100%-owned Gibraltar Halloysite Project on the Eyre Peninsula of South Australia, confirm the presence of kaolinite in all holes sampled and high-value halloysite in 24 of the 59 holes drilled.

Creso Pharma Ltd (ASX:CPH) (OTCMKTS:COPHF) (FRA:1X8) wholly-owned Canadian subsidiary Mernova Medical Inc has secured purchase orders for its leading Ritual Green product range totalling C$494,131 (A$502,199), demonstrating ongoing strong uptake.

Galena Mining Ltd (ASX:G1A) (FRA:GM6) welcomes the execution by Abra Mining Pty Limited (AMPL), the joint-venture company for the Abra Base Metals Project, of a Power Purchase Agreement (PPA) with Contract Power Australia Pty Ltd.

Rumble Resources Ltd’s (ASX:RTR) (FRA:20Z) final drill assay results from reverse circulation drilling at Barker Well Prospect of Braeside project in Western Australia’s Pilbara region have revealed multiple high-grade lead breccia zones from surface and over 800 metres of strike.

Matador Mining Ltd (ASX:MZZ) has received more impressive near-surface gold grades and widths from the final three holes of the Isle Aux Morts resource and extension drilling program at its 100%-owned Cape Ray Gold Project in Newfoundland, Canada.

FTSE 100 slips as strong US retail sales raise inflation concerns

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