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London open: stocks flat as focus turns to Fed meeting

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UK markets paused at a one-month high on Thursday morning as easing fears over Syria gave investors the chance to focus on the upcoming policy meeting at the Federal Reserve.

Traders were also showing caution ahead of speeches from Bank of England Governor Mark Carney as he testifies to the Treasury Select Committee along with Paul Fisher and David Miles about the recent Inflation Report. European Central Bank President Mario Draghi will also be in focus as he speaks at the Bank of Latvia’s Economic Conference.

The FTSE 100 was trading more or less flat on yesterday’s close of 6,588.43 – this was its highest closing price since August 13th when it ended the day at 6,611.94.

“There is a suspicion that with no other major catalysts to spark further gains or trigger a sell-off, investors may decide to hold fire until the Federal Reserve meeting due to be held next Tuesday-Wednesday,” said Financial Sales Trader Max Cohen from Spreadex.

A September ‘tapering’ of Fed stimulus had looked almost certain – according to the majority of economists – up until last week when a worse-than-expected US jobs report cast doubt on analysts’ expectations. Given that the Fed said that reduction in asset purchases would be largely tied to the recovery in the labour market, there is now speculation that policymakers could wait until later on in the year before pulling the plug.

Fears over an impending US strike on Syria eased this week after it accepted a Russian proposal to hand over all chemical weapons to international control in an attempt to avoid US military action.

In a nationally televised speech on Tuesday night, US President Barack Obama asked Congress to delay a vote on military action against Bashar al-Assad’s regime in light of recent diplomatic developments.

Meanwhile, Russian President Vladimir Putin on Wednesday called on the US not to intervene in Syria, especially if action is not approved by the United Nations first. In a commentary in The New York Times, he said: “The potential strike by the United States against Syria, despite strong opposition from many countries and major political and religious leaders, including the pope, will result in more innocent victims and escalation.”

Supermarket group Morrisons was on the rise early on after a broadly in-line set of first-half results. Profits fell 21.8% to £344m while total turnover was flat at £8.9bn. Analysts at Jefferies said it was a “mixed” first half, but an “undemanding valuation and a clear reduction in capes intensity from here onwards point to an improving outlook”. Sector peers Tesco and Sainsbury were also making gains.

Fellow retailer Next edged higher after it hiked its interim dividend payout after driving up half-year profits by 8.2% despite a fall in sales. The company said it was able to sell more clothes at full price and few clothes in its sale.

AMEC rose after walking away from making a firm offer for FTSE 250 engineering peer Kentz Corporation. The company said that it continues to see “attractive opportunities to extend its geographic footprint in the growth regions” and additional cash returns will be considered in the fourth quarter.

Travel and leisure stocks were in demand today with TUI Travel, InterContinental Hotels, IAG and Carnival among the best performers.

Silver and gold prices were heading lower this morning, causing shares of precious metals producers Randgold and Fresnillo to take a hit.

Industrial group Melrose was also in the red after Citigroup downgraded the stock to ‘neutral’ on valuation grounds after a strong outperformance so far this year. The bank said: “While we continue the see attractions on a long-term view, driven by a management team, which has strong record of creating value, we believe the near-term catalysts are appropriately captured in today’s share price.”

Meanwhile, SABMiller was taken down a peg by Nomura which cut its rating to ‘reduce’. The broker said that the exceptional profit growth across the industry since 2005 is “unlikely to be matched”.

Source: ShareCast