London stocks rose in early trade on Wednesday, recovering from heavy losses in the previous session. The TPP midweek commentary

In early trading the FTSE 100 was up 0.5% at 8,230 having closed down 1.4% on Tuesday, with miners in particular under the cosh as investors were left disappointed that China did not announce further stimulus measures.

The main story of the week is stocks in mainland China and Hong Kong which slid overnight after China’s top economic planner, the National Development and Reform Commission, failed to announce more stimulus at a press conference.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Investors are searching for a sense of direction amid a cacophony of developments, as harsh geopolitical winds swirl and a fierce storm barrels towards Florida. Oil prices have tracked higher again, as hopes for a ceasefire between Israel and Hezbollah fade, while Hurricane Milton threatens to disrupt energy supplies, with some pipelines and delivery terminals in Tampa already shut.

"Brent Crude is currently trading around $77.5 a barrel. Prices had dipped sharply yesterday, amid hopes the Hezbollah leadership would not tie negotiations for a ceasefire to what’s happening in Gaza. But given how previous deals in stopping violence in the Middle East have seemed so close, but have ultimately collapsed, it’s not surprising that confidence in agreeing even a limited break in the war is waning, prompting supply concerns to swirl again.

"The FTSE 100 is set to gain back a little ground, following yesterday’s losses, but caution is in the air following another highly volatile session for indices in Asia. The wave of enthusiasm which greeted the kitchen sink stimulus from the People’s Bank of China is ebbing away, given the lack of detail for further fiscal stimulus. Banks in China might be ready to lend, with lower rates and deposit requirements on offer, but if the demand isn’t there, it’s still set to hold back an economic rebound. Investors had been hoping for more details on an expected fiscal stimulus, hoping tax breaks would reinvigorate consumers and companies to borrow, but the vague plan put on the table yesterday by authorities disappointed."

In equity markets, Mondi jumped to the top of the FTSE 100 after the paper and packaging firm announced the acquisition of the Western European corrugated converting and solid board assets of Schumacher Packaging for an undisclosed sum.

Mondi said the deal will expand its corrugated footprint in key markets and add complementary fibre-based products focused on ecommerce and FMCG to enhance its existing offering.

United Utilities was boosted by an upgrade to ‘outperform’ from ‘sector perform’ at RBC Capital Markets.

Rio Tinto was a little weaker after saying it had struck a deal to buy Arcadium Lithium for $6.7bn, placing it among the main producers of the key component of electric vehicle batteries. The mining giant said it was offering $5.85 a share in cash - a 90% premium to the stock’s closing price at the end of last week.

CMC Markets surged as it said net operating income for the first half was expected to have risen 45% on the prior year to £180m and that it expects to have swung to a pre-tax profit of £51m from a loss of £2m.

US futures slipped a little Wednesday morning, pressured by news that US authorities are weighing an antitrust crackdown on Google-owner Alphabet Inc., as well as signs the Federal Reserve will proceed gradually with interest-rate cuts.

Contracts on the S&P 500 and Nasdaq 100 dropped about 0.2%. Alphabet shares fell about 1.5% in premarket trading after the US Justice Department said it’s considering asking a federal judge to force Alphabet’s Google search engine to sell off parts of its business.

While fears of antitrust crackdowns on Big Tech have been around for a while, the prospect of an actual breakup push is weighing on sentiment, said Kevin Thozet, a member of the investment committee at French asset manager Carmignac. However, he downplayed the eventual impact, because “at the end of the day, when we are looking at individual values of those separate business lines within Google, investors could be better off.”

Elsewhere Chinese stocks listed onshore suffered their biggest drop in more than four years earlier this week as traders grew impatient over the pace of Beijing’s stimulus measures and weak holiday-spending data hurt sentiment.

The CSI 300 Index plunged 7.1%, erasing its advance from Tuesday when mainland markets reopened after the Golden Week holidays. While the gauge pared declines after the Ministry of Finance said it would hold a briefing on fiscal policy, selling pressure resumed to hand the measure its first loss in 11 days. An index of Chinese stocks listed in Hong Kong fell further after sliding more than 10% Tuesday.

“The market is tussling between expectation for more stimulus and economic realities,” said Yi Wang, head of quantitative investment at CSOP Asset Management Ltd. “Investors want to see a quick translation from stimulus measures into improving corporate earnings, better macro data — whether that’s with inflation, employment or local government debt. But there is a time gap between that expectation and the economic reality.”

These concerns meant Emerging-market stocks fell for a second day in a row.

MSCI Inc.’s benchmark EM equity gauge dropped 0.5% by 10:05 a.m. in London. That extended its two-day decline to 2.8%, the biggest two-day drop since early August. Hong Kong-listed companies led the decline in the index.

Still to come this week is the latest US inflation number. Month-over-month is expected to come in at 0.1%. This is in line with the Fed’s target level and they will be hoping that there aren’t any surprises. The year-over-year figure is expected to be 2.3% which is still moving steadily in the right direction.

Then on Friday, we’ll get UK GDP. The consensus here is that growth will resume with a forecasted figure of 0.2% for the month.

Markets in China, the Middle East and US inflation are all concerns for traders right now.

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On our platform:

This week has been an interesting one so far. We entered the week with our trackers tracking, most of our long or flats were market neutral and there was a slight sell bias on our active equity/long short strategies.

However, after the market retracement in Europe, we have noticed many of our long or flats move into BUY positions after the market retracement, and a number of our active strategies have now flipped to the BUY side. Meanwhile, our trackers continue to track.

Over the last few weeks, this has been a definite trend that seems to be working well for many of our strategies.

A cautious approach, and then an entry point when the trade probability seems a touch higher.

We are still waiting patiently to see if Israel retaliate directly to Iran, and until there is more clarity, the cautious approach will potentially be the right approach.

If you are one of our clients, good luck for the rest of the week.

If you are considering becoming a TPP client, then schedule a call to find out more about the 3 tactics employed by TPP that assist investors to build portfolios that aim to beat your market benchmark.

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