London close: Stocks finish weaker as investors look to Fed
London stocks finished in negative territory on Wednesday, amid ongoing worries about the pandemic, as investors eyed the latest policy announcement from the Federal Reserve.
The FTSE 100 ended the session down 1.3% at 6,567.37, and the FTSE 250 was 0.83% weaker at 20,278.35.
Sterling was in a mixed state, last falling 0.34% on the dollar to trade at $1.3689, and strengthening 0.13% against the euro to €1.1311.
The Fed announcement was due shortly after bourses close in Europe.
“Losses are gathering pace across markets this afternoon, with investors apparently shaken from their torpor after weeks of a quiet rally that has seen stock markets propelled to record highs,” said IG chief market analyst Chris Beauchamp.
“Bubble fears are everywhere - it appears, but for now the most speculative action appears to be confined to a small subset of the market.”
Beauchamp said that some pre-Fed nerves were likely at play, but with the committee determined to help steer the US economy back onto a solid footing, any talk of tapering would be “very premature”.
“For the moment however stock markets have run out of room to move higher as the good news flow of recent months dries up.”
In equity markets, precious metals miner Fresnillo lost 13.04% 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 down 2.96%, Antofagasta falling 2.95%, BHP 2.4% weaker, Glencore sliding 6.67%, and Anglo American 6.21% weaker.
Defence contractor Babcock was off 1.52% after a downgrade to ‘underweight’ from ‘overweight’ at Barclays, which said a capital raise was likely.
On the upside, education publisher Pearson gained 13.97%.
“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,” said CMC Markets analyst David Madden.
“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 was likely down to short covering, as hedge funds backed out of their positions in light of what had happened to heavily shorted stocks like GameStop.
“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 9.93% higher.
Convenience food producer Greencore 7.16% firmer after an upgrade to ‘buy’ from ‘hold’ at Jefferies, following what it called a "reassuring" first-quarter update.
FTSE 100 - Risers
Pearson (PSON) 867.80p 13.97%
Hargreaves Lansdown (HL.) 1,788.00p 6.30%
British Land Company (BLND) 464.00p 5.17%
Ocado Group (OCDO) 2,883.00p 3.44%
Land Securities Group (LAND) 636.60p 2.72%
Next (NXT) 8,038.00p 2.01%
British American Tobacco (BATS) 2,783.50p 1.83%
BAE Systems (BA.) 477.90p 1.66%
Sage Group (SGE) 618.60p 1.34%
St James's Place (STJ) 1,195.00p 1.14%
FTSE 100 - Fallers
Fresnillo (FRES) 925.20p -13.04%
Glencore (GLEN) 237.80p -6.75%
Anglo American (AAL) 2,354.50p -6.21%
Evraz (EVR) 491.80p -4.73%
Avast (AVST) 488.80p -4.62%
Aveva Group (AVV) 3,720.00p -4.59%
Polymetal International (POLY) 1,585.50p -4.21%
London Stock Exchange Group (LSE) 8,670.00p -4.18%
Pershing Square Holdings Ltd NPV (PSH) 2,490.00p -4.04%
Coca-Cola HBC AG (CDI) (CCH) 2,164.00p -3.91%
FTSE 250 - Risers
Hammerson (HMSO) 22.80p 12.43%
Petrofac Ltd. (PFC) 123.30p 11.13%
Cineworld Group (CINE) 80.28p 9.93%
Greencore Group (GNC) 121.00p 6.89%
Micro Focus International (MCRO) 429.20p 6.26%
Capital & Counties Properties (CAPC) 140.00p 5.58%
Crest Nicholson Holdings (CRST) 325.20p 5.04%
Capita (CPI) 36.28p 4.86%
Centrica (CNA) 51.92p 4.46%
Network International Holdings (NETW) 371.60p 4.15%
FTSE 250 - Fallers
AO World (AO.) 300.00p -8.26%
Ferrexpo (FXPO) 285.20p -5.87%
Mediclinic International (MDC) 281.00p -5.77%
Biffa (BIFF) 228.50p -5.38%
Hochschild Mining (HOC) 194.20p -5.18%
Energean (ENOG) 783.50p -4.90%
Royal Mail (RMG) 395.50p -4.37%
Indivior (INDV) 138.60p -4.35%
BlackRock World Mining Trust (BRWM) 531.00p -4.32%
Ascential (ASCL) 337.00p -4.26%