(Alliance News) - Stock prices in London were higher on Wednesday afternoon, in solid trade before focus turns to the US, where there is an interest rate decision and a slew of tech sector earnings later.
The FTSE 100 index added 27.29 points, 0.3%, at 8,561.16. The FTSE 250 was up 114.30 points, 0.6%, at 20,702.81, and the AIM All-Share lost just 0.14 of a point at 715.18.
The Cboe UK 100 was up 0.3% at 858.16, the Cboe UK 250 rose 0.6% at 18,116.41, and the Cboe Small Companies was down 0.1% at 16,026.99.
In Frankfurt, the DAX 40 rose 0.8% in early afternoon trade, while the CAC 40 fell 0.2%.
The pound was quoted at USD1.2418 on Wednesday afternoon, down from USD1.2432 at the time of the London equities close on Tuesday. The euro lost ground also, trading at USD1.0400, down from USD1.0424. Versus the yen, the dollar faded to JPY155.47 from JPY155.63.
"First up is the Federal Reserve's latest interest rate decision where markets are expecting no change. The US economy is proving to be resilient and the central bank might find it hard to justify cutting the rate of borrowing," AJ Bell analyst Russ Mould commented.
After the closing bell in New York, Microsoft, Meta and Tesla report earnings.
AJ Bell's Mould added: "This trio have the power to move markets given their size and keen investor following. The market will be watching closely for updates on AI spending and usage by Microsoft and Meta, together with any new commentary on DeepSeek's arrival and cost advantages. Tesla will be all about margins and production expectations in a patchy period for electric vehicles."
The Fed decision is at 1900 GMT. It is expected to leave rates unmoved, and attention will be on what Chair Jerome Powell reveals on the interest rate outlook.
SPI Asset Management analyst Stephen Innes commented: "Despite perceptions by some that this week's gathering is a 'nothing burger', the implications are far from trivial, especially considering the market's heavy lean into long-duration positions. While the Fed is cognizant of these dynamics, even a hint of a hawkish tilt in their commentary could rattle bonds significantly. Moreover, looming tariffs could disrupt the Treasury rally and propel the dollar, adding another layer of complexity to the Fed's calculations. The stakes are high, and even subtle shifts in tone or emphasis from the Fed could have outsized effects on the financial market.
"Swaps signal a 30% probability of a Fed rate cut in March, but the overwhelming expectation is that rates will hold steady this week. As inflation continues to grip the financial world tightly, the financial world is eager for any hint of policy shifts on the horizon, and it will be watching every word from Fed Chair Jerome Powell during his upcoming press conference."
Before the Fed decision, the Bank of Canada is expected to announce a 25 basis point rate cut at 1445 GMT.
On Thursday, the European Central Bank takes centre-stage. It is also expected to cut rates.
In New York, the Dow Jones Industrial Average is called to open flat and the S&P 500 and Nasdaq Composite up 0.1% and 0.4%.
In London, water utilities overcame earlier share price weakness to trade higher. United Utilities added 2.2%, while Pennon rose 4.9%.
United Utilities said it has accepted the final determination of price controls set out by water industry regulator Ofwat in December.
"With the final determination agreed, we are now able to progress what will be the largest investment in water and wastewater infrastructure in over 100 years, to build a stronger, greener and healthier North West. This historic GBP13 billion investment will support 30,000 jobs across the North West, bringing focused investment in skills and opportunities, supporting economic growth in our region," said Chief Executive Officer Louise Beardmore.
The investment will be funded by the rise in bills, United Utilities noted. The company also will continue to upgrade its dividend in line with the rises in the consumer prices index, including owner occupiers' housing costs.
Pennon launched a GBP490 million equity raise to support the investment required by Ofwat's five-year plan.
Pennon said the funds would go towards "increased investment in the water businesses", and proposed a rights issue of 185.9 million new shares at 264 pence each, on the basis of 13 new shares for every 20 existing shares.
Pennon also revised its dividend policy on the back of Oftwat's plan, rebasing last year's GBP129.3 million total dividend "on a dividend per share basis". The rebased payout will then also grow by the CPIH rate of inflation in the UK.
Dowlais shot up 11%. Shares currently traded at 76.07 pence, giving it a market capitalisation of GBP1.02 billion.
It backed a tie-up with American Axle & Manufacturing, a producer of driveline products and systems, ending its brief stint on the London market as a stand-alone company.
"The combination will bring together two companies with highly complementary customer bases, geographic footprints, powertrain-agnostic product portfolios, and manufacturing operations," Detroit, Michigan-based AAM commented.
Shareholders in London-based automotive engineering firm Dowlais stand to receive 0.0863 of a new AAM share, as well as 42 pence in cash and up to 2.8p in the form of a Dowlais final dividend.
The terms of the deal imply an 85.2p value per Dowlais share, based on AAM's closing price of USD5.82 on Tuesday. The offer price is a 25% premium to the Dowlais Tuesday closing price.
The deal gives the firm a GBP1.16 billion value on a fully diluted basis. Dowlais will hold 49% of the enlarged group.
Dowlais was spun out of Melrose Industries in April 2023. Dowlais includes the GKN Automotive and the GKN Powder Metallurgy businesses.
Dowlais said it has cancelled a previously announced GBP50 million share buyback programme with immediate effect after agreeing the AAM deal.
WH Smith added 6.9%. The retailer said it made a "good start" to its financial year, hailing trading in its core Travel business. Revenue in the 21 weeks to January 25 rose 3% on-year, with 7% growth in Travel offset by a 6% decline in the High Street offering.
Ahead of an annual general meeting on Wednesday, Chief Executive Carl Cowling said: "The group has had a good start to the financial year, and we continue to see strong momentum across our core Travel business. Our UK Travel business has delivered another excellent performance across all channels, as we continue to make good progress with the rollout of our one-stop-shop for travel essentials format. In North America, we have seen a notable shift in like-for-like revenue growth, up 3%, as a result of the actions we have taken to enhance our ranges and introduce new categories. We are also delighted to announce that we have won 8 stores at Orlando airport, further to our announcement in November and, more recently, a further 4 stores at Portland airport."
WH Smith over the weekend said it is "exploring potential strategic options" for the High Street unit, including a possible sale.
Elsewhere in London, Naked Wines shares advanced 12%, as it hailed "solid" trading during the peak period.
Revenue in the 13 weeks to December 30, which includes the all-important Christmas sales period, fell 8.9% on-year at constant currency. The online wine seller said this pace of decline eased from 14% in its half-year.
CEO Rodrigo Maza said: "We are pleased with our performance during the important peak season, which was solid and featured improving trends."
British Airways parent IAG added 2.8%, meanwhile, among the best large-cap performers.
UK Chancellor Rachel Reeves has given her support for a third runway at Heathrow Airport.
In a speech in Oxfordshire on growth, she said the west London airport's expansion is "badly needed" because "for decades its growth has been constrained".
Heathrow's plan to build a third runway received parliamentary approval in June 2018, but has been delayed by legal challenges and the coronavirus pandemic.
A barrel of Brent fell to USD76.08 midday Wednesday, from USD77.21 at the time of the London equities close on Tuesday. An ounce of gold fetched USD2,759.25, up from USD2,755.79 on Tuesday, but off an earlier high of USD2,766.
By Eric Cunha, Alliance News news editor
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