London open: Stocks rise after late Wall Street rally

London shares rose in early trade on Wednesday, taking their cue from a rebound on Wall Street and recovering from heavy losses in the previous session, as investors sifted through corporate news.

At 0830 GMT, the FTSE 100 was up 0.9% to 7,201.94, while the pound was down 0.1% against the euro and the dollar at 1.1260 and 1.3933, respectively. The top-flight index had ended the previous session at around eight-month lows after what appeared to be a technical correction in US stocks, likely sparked by concerns that rising inflation might force the Federal Reserve to hike rates more than expected this year.

But Wednesday's session was underpinned by a more solid, if volatile, performance in the US, where all the major indices managed to close higher, recovering from the sharp falls seen on Monday.

Konstantinos Anthis at ADS Securities said: "Investors seem to believe that the worst is over and that the sell-off was just a market tantrum that happens a couple of times a year but we tend to believe that there's more to come.

"The key catalysts behind the retreat in the equities markets have to do with the new reality in bond yields, concerns about a tighter Fed policy and doubts over the effectiveness of Trump's tax reform. These catalysts will remain in the foreground which leads us to believe that another selling round in the stock markets should be expected."

Indeed, with US futures markets pointing towards losses on Wednesday, with US 10-year Treasury yields remaining close to 2.8% and the VIX 'fear index' remains elevated, analyst Neil Wilson at ETX Capital said there is still "plenty of volatility" in the market that "suggests the relative calm of the last 18 months has ended and we are in now in store for more gyrations in equity markets. Certainly there is a risk that yesterday’s rally is a fake out before another selloff."

In UK corporate news, Imperial Brands edged up after cautioning that first-half revenues will be hit by new tobacco laws in the UK and an adverse sales mix abroad, but said it was "significantly stepping up" its activities in vaping and e-cigarettes.

Sales, marketing and support services group DCC was a touch higher after it said operating profit for the period to 31 December was in line with expectations and ahead of the prior year. The group also announced the acquisition of US-based Elite, a provider of contract manufacturing and related services to the healthcare and dietary supplements market.

Corrugated packaging company Smurfit Kappa was in the black after saying that earnings rose 10% in the fourth quarter as strong growth in Europe offset reduced earnings in the Americas.

Mining giant Rio Tinto rose as it declared a record full-year dividend, posted a 69% jump in profit and announced an additional $1bn share buyback.

Severn Trent advanced as the water company reiterated its full-year earnings expectations and said it is still on track to earn at least £50m in outperformance payments.

Redrow was in the black after the housebuilder posted record interim profit and revenue as completions rose amid "robust" demand.

Residential property group Grainger gained after saying it had a "positive" start to the financial year, with good demand for rental homes and strong rental growth, ahead of last year, while Tullow Oil rallied after it reported its first annual profit in three years thanks in part to rising oil prices.

On the downside, Tesco was among the worst performers on news that thousands of mainly female shop workers are launching legal action to claim back up to £4bn in back pay, saying they earned as much as £3 less an hour than male workers.

Johnson Matthey ticked a touch lower after the specialty chemicals group said that it will recognise a charge of £50m after settling a lawsuit, but also announced that changes to the US tax system would have a positive impact on the group.

In broker note action, Rentokil Initial was boosted by an upgrade to 'outperform' at Credit Suisse, but outsourcer Capita was under the cosh after a downgrade to 'hold' at HSBC.

Market Movers

FTSE 100 (UKX) 7,201.94 0.85%
FTSE 250 (MCX) 19,413.85 0.79%
techMARK (TASX) 3,239.62 0.68%

FTSE 100 - Risers

Rentokil Initial (RTO) 292.00p 3.58%
Scottish Mortgage Inv Trust (SMT) 435.57p 3.17%
Smurfit Kappa Group (SKG) 2,514.00p 2.61%
United Utilities Group (UU.) 705.40p 1.97%
National Grid (NG.) 763.30p 1.95%
Old Mutual (OML) 226.50p 1.71%
Severn Trent (SVT) 1,846.50p 1.68%
Royal Dutch Shell 'B' (RDSB) 2,343.00p 1.65%
Centrica (CNA) 126.00p 1.53%
Royal Dutch Shell 'A' (RDSA) 2,320.50p 1.51%

FTSE 100 - Fallers

Randgold Resources Ltd. (RRS) 6,358.00p -1.55%
Tesco (TSCO) 197.90p -1.00%
Hargreaves Lansdown (HL.) 1,742.00p -0.54%
Coca-Cola HBC AG (CDI) (CCH) 2,238.00p -0.36%
Antofagasta (ANTO) 909.80p -0.31%
Just Eat (JE.) 774.60p -0.28%
RSA Insurance Group (RSA) 593.40p -0.27%
Fresnillo (FRES) 1,282.50p -0.19%
Whitbread (WTB) 3,750.00p -0.13%
Johnson Matthey (JMAT) 3,239.00p -0.06%

FTSE 250 - Risers

F&C Global Smaller Companies (FCS) 1,315.00p 3.95%
UDG Healthcare Public Limited Company (UDG) 770.00p 3.77%
Petrofac Ltd. (PFC) 482.99p 3.42%
Tullow Oil (TLW) 189.45p 3.24%
Sirius Minerals (SXX) 22.62p 3.01%
Polar Capital Technology Trust (PCT) 1,096.50p 2.86%
FDM Group (Holdings) (FDM) 907.03p 2.84%
Redrow (RDW) 609.34p 2.67%
Coats Group (COA) 75.34p 2.50%
Alfa Financial Software Holdings (ALFA) 454.50p 2.25%

FTSE 250 - Fallers

Cineworld Group (CINE) 227.40p -1.98%
TI Fluid Systems (TIFS) 250.20p -1.42%
Capita (CPI) 194.92p -1.28%
Acacia Mining (ACA) 175.35p -0.60%
Softcat (SCT) 518.00p -0.58%
Ocado Group (OCDO) 473.80p -0.57%
AA (AA.) 126.45p -0.47%
Fidelity China Special Situations (FCSS) 234.89p -0.47%
Dunelm Group (DNLM) 623.50p -0.32%
Centamin (DI) (CEY) 154.72p -0.15%