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(Alliance News) - London's FTSE 100 hit a near seven-month low on Wednesday but perked up in late morning trade, paring losses after the Bank of England moved to restore order to a wild gilt market.
The FTSE 100 index was down 25.40 points, or 0.4%, at 6,959.19 midday Wednesday. It had been down around 2% in earlier dealings, falling as low as 6,836.34 points, its weakest intraday level since early March.
The mid-cap FTSE 250 index was down 105.52 points, or 0.6%, at 17,198.59. The AIM All-Share index was down 15.82 points, or 1.9%, at 805.53.
The Cboe UK 100 index was down 0.4% at 694.89. The Cboe 250 also down 0.8%, at 14,705.00, and the Cboe Small Companies was down 1.3% at 12,584.85.
The CAC 40 stock index in Paris was down 0.3% midday Wednesday, while the DAX 40 in Frankfurt was down 0.7%.
In New York, stocks were called lower. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 down 0.2% and the Nasdaq Composite down 0.6%.
"Fear of tightening-induced recessions has wiped out the recovery we saw in stock markets over the bulk of the summer, as investors were once again burned by an over-eagerness to catch the bottom in the market despite there being little evidence of it being justified," Oanda analyst Craig Erlam commented.
"That fear has now gripped the markets and we may see a little more caution going forward as the Fed has made clear that one inflation reading doesn't make a trend, and it will take a lot more than that to convince it that it can afford to ease off the brake. Other central banks may have a lot more work to do; one in particular springs to mind, thanks to the misguided direction the government is taking the country in."
The pound fell to USD1.0591 midday Wednesday, down from USD1.0756 at the London equities close on Tuesday.
The Bank of England has moved to calm UK bond markets. The central bank will buy up government bonds to "restore orderly market conditions".
"The bank is monitoring developments in financial markets very closely in light of the significant repricing of UK and global financial assets," the BoE explained.
"This repricing has become more significant in the past day – and it is particularly affecting long-dated UK government debt. Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy."
The BoE said it will temporarily purchase long-dated UK government bonds from Wednesday. It will not change the bank's aim of a targeted GBP80 billion annual reduction in government bond holdings.
UK borrowing costs jumped as investors were spooked the unfunded tax cuts announced by Chancellor Kwasi Kwarteng on Friday last week. Kwarteng is meeting with City bankers on Wednesday in a bid to calm markets.
Equity markets in London got a boost from the BoE's intervention, paring deeper losses.
Stocks that have suffered during what has been a tumultuous week so far, earned some respite. Housebuilders Taylor Wimpey, Persimmon and Barratt spent most of the morning in the red. They were up 2.2%, 1.5% and 2.3% after the BoE intervention, however.
The euro faded to USD0.9561 midday Wednesday from USD0.9596 at the European equities close on Tuesday.
Fears of a potential European energy crisis intensified after leaks in Baltic Sea gas pipelines between Russia and Europe were found.
EU chief Ursula Von der Leyen said "sabotage" caused the leaks. She threatened the "strongest possible response" to any deliberate disruption of European energy infrastructure.
The Nord Stream 1 and 2 pipelines have been at the centre of political tensions in recent months as Russia cut gas supplies to Europe in suspected retaliation against Western sanctions following its invasion of Ukraine.
Elsewhere among major currencies, the dollar faded to JPY144.65 midday Wednesday UK time from JPY144.79 at the time of the London equities close on Tuesday.
Back on the London Stock Exchange, Burberry was the best FTSE 100 performer at midday. The stock rose 3.8%.
It named Daniel Lee as its new creative chief, replacing Riccardo Tisci.
The London-based fashion retailer said Tisci will leave at the end of this month after almost five years in the post as chief creative officer.
Burberry hailed Tisci for improving the brand's fortunes, including offering it much-needed relevance with younger shoppers. Lee's debut runway collection for Burberry will be presented at London Fashion Week in February 2023.
UBS took heart from the "immediate appointment", which reduces any disruption.
"We would expect today's announcements to be taken well by the market," the Swiss bank added.
The market was less positive on the latest boohoo update. The online retailer cut its margin guidance.
boohoo swung to a first-half loss, with earnings hurt by weak consumer confidence and a staggering number of clothing returns. Return rates were "up significantly year-on-year", boohoo said.
In the six months to August 31, revenue fell 10% year-on-year to GBP882.4 million from GBP975.9 million. Revenue was up 56% from pre-virus levels, however. boohoo swung to a GBP15.2 million pretax loss from a GBP24.6 million profit a year earlier.
Margins weakened markedly. Its adjusted earnings before interest, tax, depreciation and amortisation margin fell to 4.0% from 8.7%.
boohoo now expects an annual adjusted Ebitda margin between 3% and 5%, trimmed from its previous 4% to 7% guidance range.
boohoo shares were 7.3% lower midday Wednesday, while peer Asos lost 5.0% in a negative read-across.
Gold fell to USD1,628.91 an ounce midday Wednesday from USD1,633.10 at the London equities close on Tuesday. A barrel of Brent oil rose to USD86.91, from USD86.44.
Still to come on Wednesday's economic calendar is the US goods trade balance at 1330 BST.
By Eric Cunha; ericcunha@alliancenews.com
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