(Sharecast News) - London stocks closed in a mixed state on Wednesday, with the top-flight index outperforming its European peers thanks to a solid performance from miners and energy shares, although a so-called curve inversion on US Treasury yields saw consternation simmer.
The FTSE 100 ended the session up 0.55% at 7,578.75, while the FTSE 250 closed down 1.02% at 21,272.47.
Sterling was also struggling for direction, last gaining 0.43% on the dollar to trade at $1.3149, while it weakened 0.3% against the euro to change hands at €1.1777.
"Once again rising commodity prices have been the sticking plaster for the FTSE 100, masking losses across most of the rest of the index," said IG chief market analyst Chris Beauchamp.
"All this is a far cry from 2020, when the FTSE 100's lack of tech names saw it fall far behind its peers.
"Now it is commodities that are providing the steady hand, although even the big miners and oil stocks in the index will only be able to limit the damage if the broader outlook turns more cautious."
US Treasury bond yields were very much in focus, with the yield on the three-year note moving higher than the 10-year, and more closely-watched two-year and 10-year curves also 'inverting' briefly.
John Canavan, lead analyst at Oxford Economics, said there was a heightened focus on what a broader curve inversion could imply for the timing of the next recession.
"While we believe the two-year, 10-year spread remains a good leading recession indicator, we note that lead times have historically been long and variable.
"The bond market's view that the policy rate will need to be cut in 2024 - the Fed will have tightened too much - also imparts increasing downside risks to our outlook for a soft landing for the economy in 2023.
"As part of our view, however, we do not see the Fed raising rates quite as high as the markets expect - we look for a peak fed funds rate of 2.63%, versus the market's expectation of above 3%."
On the economic front, the US economy rounded out 2021 by expanding at a healthy 6.9% annual clip between October and December, according to the Bureau of Economic Analysis - a slight downgrade from the government's previous estimate of 7%.
For the year as a whole, US gross domestic product, its total output of goods and services, jumped 5.7% for the fastest calendar-year growth seen since 1984's 7.2% surge in the wake of a recession.
The small downgrade from the Commerce Department's original estimate came as a result of a smaller-than-expected increase in consumer spending and fewer exports.
Moving forward, however, growth was predicted to slow sharply in 2022, most notably in the first quarter, as higher inflation will likely weigh on consumer spending and a move by the Federal Reserve to start pushing up borrowing costs, leading to a sharp increase in mortgage rates, was predicted to result in a decline in home sales.
Exports could also weaken due to overseas economies being disrupted by Russia's invasion of neighbouring Ukraine.
Economists were forecasting growth to fall to as low as 0.5% in the first quarter of 2021 - and could possibly even slip into negative territory - while the Federal Reserve expected to see the US economy expand 2.8% this year, much lower than seen in 2021.
Staying stateside, private sector employment in the US rose a touch more than expected in March, according to the latest data from ADP.
Employment increased by 455,000 from February, versus expectations for a 450,000 jump. Meanwhile, the total of jobs added in February was revised from 475,000 to 486,000.
Small businesses with fewer than 50 employees added 90,000 jobs, while medium businesses with between 50 and 499 employees added 188,000.
Large businesses with more than 500 employees created 177,000 jobs.
"Job growth was broad-based across sectors in March, contributing to the nearly 1.5 million jobs added for the first quarter in 2022," said Nela Richardson, chief economist at ADP.
"Businesses are hiring, specifically among the service providers which had the most ground to make up due to early pandemic losses.
"However, a tight labour supply remains an obstacle for continued growth in consumer-facing industries."
Elsewhere, German inflation surged in March to its highest level since 1981 amid soaring energy prices, according to preliminary data released by Destatis earlier.
Consumer prices jumped 7.3% on the same month a year earlier, up from 5.1% in February and versus expectations of 6.3%.
"Since Russia's attack on Ukraine, the prices of natural gas and mineral oil products have markedly increased again and have had a considerable impact on the high rate of inflation," the federal statistics office commented.
"A similarly high inflation rate in Germany was last recorded in autumn 1981 when mineral oil prices had sharply increased, too, as a consequence of the first Gulf War.
"Additional factors in the current reference month are delivery bottlenecks due to interruptions in supply chains caused by the Covid-19 pandemic and the marked increases in energy product prices at upstream stages in the economic process."
In equity markets, miners gained as metals prices rose, with Anglo American up 4.6%, Glencore rising 4.17% and Rio Tinto ahead 3.95%.
Oil giants Shell and BP also gushed higher, by 4.43% and 3.07% respectively, amid firmer oil prices, with FTSE 250 players Energean and Tullow Oil ahead 5.61% and 4.22%.
Futures for the thick black stuff continued to advance at the end of the day, with Brent crude last up 3.29% on ICE at $113.86 per barrel, and the NYMEX quote for West Texas Intermediate ahead 3.68% at $108.08.
On the downside, Pearson shares tumbled 5.93% after US investment manager Apollo Global Management said it was not planning an offer for the educational publisher, after failing to agree terms.
Gold miner Polymetal International reversed earlier gains to plunge 9.94% by the close, even after it maintained full-year production guidance and said operations in Russia and Kazakhstan continue undisrupted.
Fellow Russia-focussed precious metal maker Petropavlovsk slid 15.66% after saying it was in the early stages of discussions with advisers and Gazprombank over a potential restructuring of the group's debt.
Outsourcer Mitie Group lost 4.66% after reports that the competition watchdog had raided its offices and were examining senior employee emails, after the Home Office raised concerns about suspected anti-competitive behaviour.
The Competition and Markets Authority (CMA) is examining the relationship between Mitie and American firm PAE, which operate a joint venture for the Ministry of Defence but were also competing to run Home Office immigration removal centres at Derwentside, in County Durham, and at Heathrow Airport.
In broker note action, credit-checking firm Experian was 2.93% weaker after a downgrade to 'neutral' at Citi, while Lloyds Banking Group was off 3.76% after a downgrade to 'underperform' at RBC Capital Markets.
"The vision for the bank is too long-dated and comes with significant execution risk; we would rather wait before buying into the story," RBC said.
Vesuvius was in the red by 7.24% after a downgrade to 'underweight' at Barclays.
Market Movers
FTSE 100 (UKX) 7,578.75 0.55%
FTSE 250 (MCX) 21,272.47 -1.02%
techMARK (TASX) 4,373.33 -0.26%
FTSE 100 - Risers
Anglo American (AAL) 3,976.00p 4.60%
Shell (SHEL) 2,112.80p 4.43%
Glencore (GLEN) 500.70p 4.17%
Fresnillo (FRES) 744.40p 4.08%
Rio Tinto (RIO) 6,076.00p 3.95%
BP (BP.) 382.75p 3.07%
Endeavour Mining (EDV) 1,915.00p 2.68%
United Utilities Group (UU.) 1,109.50p 2.48%
BAE Systems (BA.) 730.60p 2.47%
SSE (SSE) 1,744.00p 2.46%
FTSE 100 - Fallers
Pearson (PSON) 739.20p -5.93%
JD Sports Fashion (JD.) 152.90p -4.65%
Smith (DS) (SMDS) 326.80p -4.36%
Ashtead Group (AHT) 4,845.00p -4.17%
St James's Place (STJ) 1,457.00p -3.99%
Melrose Industries (MRO) 128.55p -3.92%
Next (NXT) 6,274.00p -3.77%
Lloyds Banking Group (LLOY) 48.12p -3.76%
CRH (CDI) (CRH) 3,127.00p -3.55%
Kingfisher (KGF) 265.00p -3.50%
FTSE 250 - Risers
Energean (ENOG) 1,167.00p 5.61%
Tullow Oil (TLW) 53.36p 4.22%
Centamin (DI) (CEY) 91.96p 3.82%
TP Icap Group (TCAP) 150.80p 2.56%
Capricorn Energy (CNE) 220.80p 1.94%
BlackRock World Mining Trust (BRWM) 744.00p 1.92%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 101.80p 1.90%
Diversified Energy Company (DEC) 118.00p 1.90%
FDM Group (Holdings) (FDM) 1,048.00p 1.75%
Drax Group (DRX) 775.50p 1.70%
FTSE 250 - Fallers
Polymetal International (POLY) 305.30p -9.94%
Trainline (TRN) 198.20p -7.56%
Vesuvius (VSVS) 330.80p -7.23%
Currys (CURY) 93.15p -7.13%
TI Fluid Systems (TIFS) 194.20p -6.05%
Pets at Home Group (PETS) 373.20p -5.76%
XP Power Ltd. (DI) (XPP) 3,420.00p -5.52%
TBC Bank Group (TBCG) 1,106.00p -5.47%
Bodycote (BOY) 650.00p -5.11%
SSP Group (SSPG) 240.70p -4.86%