London midday: Stocks fall ahead of US tech earnings, Fed announcement

London stocks had fallen further into the red by midday on Wednesday amid ongoing worries about the pandemic, as investors eyed earnings from US technology giants and the latest policy announcement from the Federal Reserve.

The FTSE 100 was down 0.7% at 6,609.89.

The Fed announcement is due after the European close. Before that, investors will be watching for earnings from Apple, Facebook and Tesla.

IG said: "The Federal Reserve come back into focus today, with traders increasingly looking towards the US for some form of stimulus boost in the coming weeks. Unfortunately, with Biden expected to drive forth his $1.9 trillion stimulus coronavirus support package, we are unlikely to see the Fed turn up the dials at today's meeting.

"A new year brings new voting members for the Fed, with four regional Fed members rotating into a position where their opinion can be better reflected. Key to that voting member rotation is the addition of Atlanta Fed President Raphael Bostic who has already speculated that the Fed might be able to 'recalibrate' in 'fairly short order' once the recovery gets going. Despite fears that Bostic could be keen to start the tapering discussion, Powell has been swift to disregard the notion that we will see any form of monetary tightening in the near-future."

Nevertheless, IG said markets will be keeping a close eye on commentary around this meeting as the promise of a vaccine and fiscal stimulus-led recovery ensures the committee could soon start discussing how their position should change.

In equity markets, precious metals miner Fresnillo lost ground after it lowered its current-year gold output forecast as a landslip at its Noche Buena mine and Covid restrictions hit 2020 production. The company, which operates seven mines in Mexico, reported a 12.1% fall in 2020 gold production to 769,618 ounces, at the upper end of revised estimates provided in October.

Miners were weaker generally, with Rio Tinto, Antofagasta, BHP, Glencore and Anglo American all trading down.

Defence contractor Babcock slumped after a downgrade to ‘underweight’ from ‘overweight’ at Barclays, which said a capital raise was likely.

On the upside, education publisher Pearson was the standout gainer on the FTSE 100. CMC Markets analyst David Madden said: "There is no new news about the publishing company but it is known that a relatively large amount of the stock has been shorted, so it is possible that we are witnessing a major short squeeze.

"Recently, the US group GameStop, has undergone erratic moves as there is a tussle between short sellers and buyers. It might be the case that funds are flowing into Pearson to shake out some of the short sellers."

Neil Wilson, chief market analyst at Markets.com, said: "It is likely down to short covering as hedge funds back out of their positions in light of what has happened to heavily shorted stocks like GME.

"This is very much about managing risk. Given the situation across the pond vis-à-vis Merlin, I would think all hedge funds are taking a good hard look at all their short positions and deciding whether they are worth it. Shorting can result in potentially infinite losses, so the risk management is always against you if the flows are there from buyers. As a result of the short covering, or rather in anticipation of it, some traders (maybe some on Reddit, who knows?) may be front-running and contributing to the pump."

Other heavily-shorted stocks also gained, with Cineworld sharply higher, while French real estate investment trust Klepierre and commercial real estate company Unibail-Rodamco rallied, along with Polish video game developer CD Projekt.

Convenience food producer Greencore was higher after an upgrade to ‘buy’ from ‘hold’ at Jefferies, following what it called a "reassuring" first-quarter update.

Market Movers

FTSE 100 (UKX) 6,609.89 -0.66%
FTSE 250 (MCX) 20,353.51 -0.46%
techMARK (TASX) 4,145.02 -0.58%

FTSE 100 - Risers

Pearson (PSON) 826.80p 8.59%
Hargreaves Lansdown (HL.) 1,771.00p 5.29%
British Land Company (BLND) 462.40p 4.81%
Sainsbury (J) (SBRY) 261.40p 4.02%
Morrison (Wm) Supermarkets (MRW) 190.80p 3.41%
Next (NXT) 8,084.00p 2.59%
Tesco (TSCO) 249.30p 2.42%
HSBC Holdings (HSBA) 409.10p 2.22%
Standard Life Aberdeen (SLA) 314.70p 2.18%
BAE Systems (BA.) 480.10p 2.13%

FTSE 100 - Fallers

Fresnillo (FRES) 965.20p -9.16%
Aveva Group (AVV) 3,707.00p -4.92%
Anglo American (AAL) 2,396.00p -4.56%
Just Eat Takeaway.Com N.V. (CDI) (JET) 7,782.00p -4.16%
NATWEST GROUP PLC ORD 100P (NWG) 148.00p -3.55%
Whitbread (WTB) 2,831.00p -3.54%
CRH (CRH) 3,023.00p -3.45%
London Stock Exchange Group (LSE) 8,738.00p -3.43%
Glencore (GLEN) 246.40p -3.37%
Ashtead Group (AHT) 3,607.00p -3.30%

FTSE 250 - Risers

Cineworld Group (CINE) 81.54p 11.48%
Greencore Group (GNC) 121.80p 7.60%
Petrofac Ltd. (PFC) 119.10p 7.30%
Centrica (CNA) 51.84p 5.07%
Micro Focus International (MCRO) 422.80p 4.68%
Provident Financial (PFG) 262.20p 4.46%
Capital & Counties Properties (CAPC) 138.30p 4.30%
Hammerson (HMSO) 21.08p 3.94%
Crest Nicholson Holdings (CRST) 321.00p 3.75%
Network International Holdings (NETW) 369.00p 3.42%

FTSE 250 - Fallers

AO World (AO.) 308.00p -5.81%
Babcock International Group (BAB) 205.90p -5.25%
Royal Mail (RMG) 392.90p -5.12%
Ferrexpo (FXPO) 287.60p -5.08%
Hochschild Mining (HOC) 194.90p -4.83%
Mediclinic International (MDC) 284.20p -4.69%
Just Eat Takeaway.Com N.V. (CDI) (JET) 7,782.00p -4.16%
Cairn Energy (CNE) 170.10p -3.74%
Polypipe Group (PLP) 502.00p -3.65%
easyJet (EZJ) 704.00p -3.61%