London close: Stocks rise as investors look towards Fed decision

(Sharecast News) - Stocks in London closed above the waterline on Tuesday, underpinned by a solid performance from the mining sector and stellar gains for Ocado, while investors held their collective breath as the US Fed's two-day policy meeting kicked off. The FTSE 100 ended the session up 1.29% at 7,186.16, and the FTSE 250 was ahead 1.71% at 18,195.90.

Sterling was in a mixed state, last trading down 0.18% on the dollar at $1.1448, while it strengthened 0.09% against the euro to change hands at €1.1612.

"European markets initially raced out of the traps in early trade after Asia markets rallied strongly on unconfirmed reports that China was looking at a plan for the unwinding of its current zero-Covid strategy, with the creation of a 'reopening committee' which would study options for a reopening of the Chinese economy at some point in the future," said CMC Markets chief market analyst Michael Hewson.

"One other factor driving the current move higher is a hope that the Federal Reserve may follow in the likes of the Bank of Canada and the Reserve Bank of Australia in starting to slow the pace of their rate hiking cycle, after tomorrow's expected 75-basis point hike.

"This initially saw US yields fall back sharply and the dollar slide back along with strong rebounds in commodity prices, notably crude oil and copper, however this yield weakness has been tempered by some resilient US economic data released earlier this afternoon, which has seen equity markets retreat from their highs of the day."

In economic news, activity in the UK manufacturing sector contracted again in October, with the S&P Global/CIPS manufacturing purchasing managers' index (PMI) falling to a 29-month low of 46.2 from 48.4 in September.

It had now remained below the 50-point mark that separates contraction from expansion for three months in a row, but was above the flash estimate of 45.8.

The survey showed that new order intakes fell at the fastest pace since May 2020, which was put down to weaker domestic market, already-high stock levels at clients, subdued client confidence and inflationary pressures.

"UK manufacturing production suffered a further decline at the start of the fourth quarter, with the sector buffeted by weak demand, high inflation, supply-chain constraints and heightened political and economic uncertainties," said Rob Dobson, director at S&P Global Market Intelligence.

"New work intakes fell at the quickest pace since May 2020 as demand in domestic and export markets weakened.

"While the downturn has lessened the pressure on prices, the weak pound and high energy prices mean elevated cost inflation remains a prime concern for manufacturers."

Elsewhere, UK house prices suffered their first monthly decline in October since July last year, according to Nationwide, with prices falling 0.9% on the month.

They had been flat in September, with the new data marking the largest monthly fall since June 2020.

On the year, house prices were up 7.2% in October, down from 9.5% growth a month earlier, with the average price standing at £268,282.

Nationwide chief economist Robert Gardner said the market had undoubtedly been impacted by the turmoil following the mini-Budget, which led to a sharp rise in interest rates.

"Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation," he said.

"The market looks set to slow in the coming quarters. Inflation will remain high for some time yet, and Bank Rate is likely to rise further as the Bank of England seeks to ensure demand in the economy slows to relieve domestic price pressures."

On the continent, the head of the European Central Bank warned earlier of the risk posed by excessively-high inflation expectations, despite recession risks.

In remarks to Latvian website Delfi Bizness, Christine Lagarde said that inflation across the single currency bloc was "too high", and emphasised that price stability was "the basis for a smoothly functioning economy in which everyone benefits".

"The longer inflation remains at this high level, the greater the risk that it will spread throughout the economy," she said.

"Then consumers and businesses will also begin to expect higher inflation in the future, and this is dangerous."

Across the pond, the Institute for Supply Management's US manufacturing PMI fell to 50.2 in October from 50.9 in September, making for the slowest growth in factory activity since the mid-2020's contraction.

New orders contracted to 47.1 from 49.2, while employment rose and the backlogs of orders dropped.

Price pressures continued to ease for a seventh month in a row, falling into contraction territory as it dropped to 46.6 from 51.7, while production rose to 52.3 from 50.6.

Still stateside, demand for labour in the US continued to cool in September, but at a less accelerated pace than previously thought, according to the Department of Labor's job openings and labour turnover survey.

The number of job openings increased at a seasonally-adjusted month-on-month pace of 4.3% to reach 10.72 million, above expectations for 9.8 million.

Additionally, the prior month's reading was revised up to show a roughly 8% drop, versus a preliminary estimate of a 10% decline.

Finally on data, activity in China's private manufacturing sector shrank in October, but by less than expected, as Covid-19 restrictions continued to weigh.

The Caixin manufacturing PMI rose to 49.2 from 48.1 in September, coming in above expectations for a reading of 48.5.

On Monday, the official PMI for manufacturing from China's National Bureau of Statistics came in at 49.2 for October, down from 50.1 a month earlier and missing expectations of 50.0.

On London's equity markets, Ocado Group rocketed 38.57% after the online grocer and warehousing technology developer signed a partnership between Ocado Solutions and Korean retail conglomerate Lotte Shopping.

The firm said the deal would see the Ocado Smart Platform be implemented into Lotte's online business.

BP closed up 1.39% after it reported a surge in quarterly profit, well ahead of City expectations, and announced a further $2bn share buyback, after Russia's invasion of Ukraine pushed oil and gas prices to historic highs.

The energy giant said third-quarter underlying replacement cost profits totalled $8.15bn, compared to $3.32bn a year earlier, while total revenue and other income soared to $57.81bn from $37.87bn.

Analysts had been expecting pre-tax profits to be closer to $6.1bn.

Profits were down slightly on the third quarter, however, at $8.45bn, following an easing in the oil price.

Tullow Oil jumped 10.17% in the wake of BP's results, while oil services engineer John Wood Group added 9.26% on a read-across.

Miners were also on the rise after an easing for the dollar earlier, with Glencore up 4.86%, Rio Tinto Group ahead 4.36%, Antofagasta rising 4.72% and Anglo American 6.06% firmer.

In broker note action, Auto Trader was boosted 2.45% after an upgrade to 'buy' from 'neutral' at UBS.

On the downside, pest control and services group Rentokil Initial fell 4.3% despite posting a jump in third-quarter profit.

Interdealer broker TP ICAP Group retreated 3.32% even after it reported a jump in revenue thanks to a solid performance from its global broking division.

Iron ore pellet maker Ferrexpo fell 4.41% after it partially resumed production at central Ukraine facilities after Russian missile strikes hindered power supplies earlier in the month, but warned it was drawing on stockpiles to meet customer orders.

The company said supply of power to operations remained "variable and limited", impacting the cost effectiveness of production.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Iain Gilbert and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,186.16 1.29% FTSE 250 (MCX) 18,195.90 1.71% techMARK (TASX) 4,278.28 0.95%

FTSE 100 - Risers

Ocado Group (OCDO) 654.60p 38.57% Anglo American (AAL) 2,756.50p 6.06% Glencore (GLEN) 523.80p 4.86% B&M European Value Retail S.A. (DI) (BME) 337.40p 4.77% Antofagasta (ANTO) 1,231.00p 4.72% Rio Tinto (RIO) 4,735.00p 4.36% Rolls-Royce Holdings (RR.) 81.50p 4.29% Prudential (PRU) 844.00p 4.09% Intermediate Capital Group (ICP) 1,100.00p 3.58% Hargreaves Lansdown (HL.) 790.40p 3.56%

FTSE 100 - Fallers

Rentokil Initial (RTO) 521.00p -4.30% Experian (EXPN) 2,703.00p -3.10% Relx plc (REL) 2,288.00p -2.26% Croda International (CRDA) 6,696.00p -0.95% BT Group (BT.A) 128.90p -0.69% Unilever (ULVR) 3,947.50p -0.68% Smith & Nephew (SN.) 1,023.50p -0.63% Coca-Cola HBC AG (CDI) (CCH) 1,890.50p -0.63% Reckitt Benckiser Group (RKT) 5,750.00p -0.52% Sage Group (SGE) 723.40p -0.47%

FTSE 250 - Risers

Auction Technology Group (ATG) 825.00p 10.44% Tullow Oil (TLW) 44.62p 10.17% ASOS (ASC) 617.00p 9.49% Mitchells & Butlers (MAB) 127.10p 9.38% Wood Group (John) (WG.) 152.85p 9.26% Molten Ventures (GROW) 347.00p 8.44% Synthomer (SYNT) 121.00p 7.56% Liontrust Asset Management (LIO) 914.00p 7.03% IP Group (IPO) 62.75p 6.36% TBC Bank Group (TBCG) 1,992.00p 5.73%

FTSE 250 - Fallers

Ferrexpo (FXPO) 97.60p -4.41% Helios Towers (HTWS) 120.00p -4.38% TP Icap Group (TCAP) 177.90p -3.32% Essentra (ESNT) 222.00p -1.33% Baltic Classifieds Group (BCG) 137.60p -1.15% Hipgnosis Songs Fund Limited NPV (SONG) 87.20p -0.91% BH Macro Ltd. GBP Shares (BHMG) 4,655.00p -0.75% PZ Cussons (PZC) 199.00p -0.50% Spectris (SXS) 3,005.00p -0.50% Bellevue Healthcare Trust (Red) (BBH) 166.80p -0.48%