The FTSE 100 retreated on Wednesday as political events and softness in mega-cap pharma stocks weighed on the index.
Equity bulls will be disappointed that yesterday’s FTSE 100 rally failed to surpass 8,400 on its fifth attempt since May. A 0.2% drop for London’s leading index on Wednesday looks to have put all-time highs at 8,445 out of immediate reach without any major catalysts before the US Non-Farm Payrolls on Friday.
“Political risk has been put back on the agenda after South Korea was plunged into chaos by the declaration, then subsequent lifting of martial law. Deep uncertainty looms for France too. The looming vote of no-confidence in the minority government of Michel Barnier threatens fresh political upheaval in a key EU member state,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
The next macro catalyst is due on Friday. The release of November’s Non-Farm Payroll report will provide traders insight into how the US economy has reacted to devasting weather events and Donald Trump’s election victory.
Although mining shares dragged on the index on Wednesday, yesterday’s rally in oil majors BP and Shell shares continued on Wednesday on as oil prices traded sideways after a brief rally. The pace of the gains for BP and Shell slowed due to the realisation that oil prices were likely to remain under pressure for the foreseeable future.
“Data and news flow were both rather lacking yesterday, with the most notable headlines being those which largely confirmed what was already known, namely, that OPEC+ is set to delay the planned 180k bpd output hike for the entirety of Q1,” said Michael Brown Senior Research Strategist at Pepperstone.
“While this was enough for a knee-jerk move higher in both Brent and WTI, in the grand scheme of things it is ‘small beer’, considering the dismal demand outlook, and proposals for the US to increase crude production by as much as 3mln bpd. I remain a rally seller in crude, though of course wouldn’t seek to hold positions over the weekend as geopolitical risk continues to linger.”
BP gained 0.5%, while Shell added 0.6%.
Centrica shares rose 0.4% on the news four nuclear plants it has a stake in will remain open longer than previously thought.
“The decision to extend the life of four ageing nuclear power plants was something British Gas owner Centrica had little control over, but it still energised the company’s share price,” explained AJ Bell investment analyst Dan Coatsworth.
“Centrica has a meaningful stake in the four EDF-partnered nuclear power plants. The extension comes as the UK looks to avoid the risk of blackouts amid the transition away from fossil fuels to renewable energy sources.”
Legal & General was the FTSE 100’s top riser after hosting a ‘deep dive’ into its retirement business and confirmed it is on track to meet group guidance set out in June. Legal & General was 4% higher at the time of writing.