(Alliance News) - Despite an unexpected return to growth for the UK private sector in February, stock prices in London were lower at midday on Tuesday as investors awaited the minutes of January's US Federal Reserve meeting, due out on Wednesday.
"Hints a 50 basis-point rate hike could be in the offing [from the US central bank] have helped sour sentiment a little but confirmation could really undermine investor confidence," said Russ Mould, investment director at AJ Bell.
The FTSE 100 index was down 13.53 points, or 0.2%, at 8,000.78. The FTSE 250 was down 123.22 points, or 0.6%, at 19,975.19, and the AIM All-Share was down 0.83 of a point, or 0.1%, at 865.41.
The Cboe UK 100 was down 0.1% at 801.03, the Cboe UK 250 was down 0.6% at 17,428.77, and the Cboe Small Companies was down 0.2% at 14,016.94.
The UK private sector saw an unexpected return to growth in February, according to preliminary survey results.
The S&P Global/CIPS UK flash composite purchasing managers' index rose to an eight-month high of 53.0 points in February from 48.5 in January.
Crossing over the 50-point no-change mark, it shows the UK private sector has returned to growth. The reading was also well above the 48.7 market consensus, as cited by FXStreet.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the much better than anticipated PMI data for February indicated "encouraging resilience" from the UK economy in the face of headwinds including rising interest rates, the ongoing cost of living crisis, labour shortages and strikes.
Susannah Street, senior analyst at Hargreaves Lansdown, said that following the latest economic health snapshot, the risk of a "seventies style recession" is "receding as quickly as the hairlines of those born in the decade."
Sterling strengthened in the wake of the PMI print. The pound was quoted at USD1.2112 at midday on Tuesday in London, sharply higher compared to USD1.2034 at the equities close on Monday.
In London, Smith & Nephew was the best blue-chip performer at midday, up 5.1%, as it kept its full-year dividend unchanged and eyed further revenue growth in 2023.
For 2022, the portfolio medical technology company said annual revenue edged up 0.1% to USD5.22 billion from GBP5.21 billion a year ago. Pretax profit, meanwhile, fell to USD235 million from USD586 million, as operating profit declined by 24% to USD450 million from USD593 million a year ago.
HSBC added 3.3% despite reporting a dip in annual profit due to expected credit charges and impairments, as it said it was considering shareholder returns from the sale of its Canadian banking arm.
In 2022, the Asia-focused lender said pretax profit fell 7.3% to USD17.53 billion from USD18.91 billion. This was slightly better than company-compiled market consensus of USD17.49 billion, however.
HSBC also updated on the USD10 billion sale of its Canadian banking business to the Royal Bank of Canada.
As a "priority use" of the sale proceeds, the board will consider a special dividend of USD0.21 per share. Any additional surplus capital from the sale would then be put towards organic growth and investment opportunities, as well as potential share buybacks, it said.
Antofagasta fell 2.0% as it reported a drop in both profit and revenue in 2022 due to poor copper production and prices and the impact of inflation on costs.
For 2022, the Chile-focused mining group reported pretax profit of USD2.56 billion, down 26% from USD3.48 billion a year prior. Revenue also fell, down 22% to USD5.86 billion from USD7.47 billion the previous year.
Antofagasta attributed this to a 12% decrease in copper sales to 642,500 tonnes from 725,600, as well as a 12% decline in realised copper prices. It also noted the impact of inflation and higher input prices.
Also weighing on the FTSE 100 at midday on Tuesday was Anglo American, Hargreaves Lansdown and Prudential. The stocks were down 4.3%, 3.2%, and 2.5%, respectively.
In the FTSE 250, Safestore fell 1.8% despite reporting a strong start to its financial year in the quarter that ended January 31.
First quarter revenue rose 9.4% to GBP55.7 million from GBP50.9 million a year prior, as the average storage rate increased 2.9% to GBP30.42 from GBP29.55.
Safestore now expects to deliver adjusted diluted EPRA earnings per share for financial 2023 in line with analysts' forecasts, with consensus cited as 49.5 pence, within a range of 45.3p to 54.0p. This would be up 4.2% from 47.5p in financial 2022.
Serco added 0.3% after the UK Financial Reporting Council said it closing its investigation regarding the company's annual results for 2011 and 2012.
The probe centred on fraud relating to a contract with the UK government for the electronic tagging of prisoners. Serco was accused of charging the taxpayer for tagging prisoners who were dead, in prison or overseas.
Elsewhere in London, Hyve jumped 19% after it announced it had received a preliminary and conditional approach from Providence Equity LLP for a possible cash offer of 105 pence per Hyve share.
In European equities on Tuesday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was down 0.4%.
Growth in the eurozone's private sector accelerated to a nine-month high in February. The S&P Global flash eurozone composite PMI rose to 52.3 in February, from 50.3 in January.
The euro stood at USD1.0657 midday Tuesday, lower against USD1.0687 at the London equities close on Monday. Against the yen, the dollar was trading at JPY134.60, higher compared to JPY134.07.
Ricardo Evangelista, senior analyst at ActivTrades, explained that as investors are currently pricing in renewed hawkishness from the Fed, this is causing the dollar to strengthen.
Still to come on Tuesday, there are flash PMI readings for the US at 1445 GMT.
According to CMC Markets' Michael Hewson, both US manufacturing and services sector activity are forecast to remain in contraction at 47.4 and 47.3, respectively, though this would be a modest improvement on the January numbers.
Stocks in New York were called lower ahead of the data, as Wall Street returns to trading following the US Presidents' day holiday on Monday.
The Dow Jones Industrial Average was called down 0.7%, the S&P 500 index down 0.7%, and the Nasdaq Composite down 0.8%.
Brent oil was quoted at USD83.37 a barrel at midday in London on Tuesday, up slightly from USD83.29 late Monday. Gold was quoted at USD1,834.90 an ounce, lower against USD1,843.50.
By Heather Rydings, Alliance News senior economics reporter
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