Traders sit on the sidelines waiting for clues on US interest rates / Image Source: Adobe

London’s blue-chips went sideways, a mixed showing relative to European peers, as all eyes turned to the US with the interest rate decision imminent.

The FTSE 100 index ended down just 0.92 of a point at 7,737.38. It had been 0.3% lower in morning trade, however.

The FTSE 250 had a more stellar day, rising 51.59 points, 0.3%, to 19,484.40. The AIM All-Share rose just 0.03 of a point to 735.59.

The Cboe UK 100 edged up slightly to 774.95 points, the Cboe UK 250 rose 0.4% to 16,941.06, and the Cboe Small Companies fell 0.3% at 14,777.61.

In European equities on Wednesday, the CAC 40 in Paris was down 0.5%, underperforming the FTSE 100 with its luxury retailers ending lower, though the DAX 40 in Frankfurt ended up 0.2%, bettering London’s blue-chip benchmark’s showing.

In New York, the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all traded a touch lower.

The Fed announces its interest rate decision at 1800 GMT. Eyes will also be on the latest summary of economic projections, also released ahead of a press conference with Chair Jerome Powell.

‘It would only take two Fed officials to shift their thinking for the median Dot to move to 50bp from 75bp of rate cuts for this year. The Fed Dots are important for FX in that they help determine market pricing of short-term dollar interest rates and dollar pricing in general. The dollar sell-off seen late last year was driven by investors falling over themselves to price an aggressive 2024 Fed easing cycle,’ analysts at ING commented.

‘Going into tonight’s FOMC meeting, market expectations are now hovering around 75bp of cuts for this year. Arguably, those Fed Dots are proving a floor for those expectations. However, were the SEP to show a median expectation of just 50bp of cuts, that floor would drop and both short-term US interest rates and the dollar would rise.’

The pound was quoted at $1.2717 late on Wednesday in London, largely unmoved from $1.2719 at the equities close on Tuesday. It had traded as low as $1.2684 earlier Wednesday. The euro stood at $1.0856, down slightly against $1.0860. Against the yen, the dollar was trading at JP¥151.61, markedly higher compared to JP¥150.76.

On Wednesday, figures from the Office for National Statistics showed the consumer price index rose 3.4% in February from a year before, having increased 4.0% annually in January.

UK inflation had been expected to decelerate to 3.6%, according to FXStreet-cited market consensus.

Lloyds Banking analysts commented: ‘While the overall rate of service sector inflation slowed to 6.1% y/y from 6.5% – its softest since January 2023 – it should be noted that the outturn was bang in line with the Bank of England’s expectations. Ahead of tomorrow’s policy announcement, that suggests that members of the Monetary Policy Committee are likely to view that underlying inflation trends in the UK are progressing as they expected (not better, not worse), likely resulting in a cautious tone being adopted in the minutes and the need to see more progress being made before they feel comfortable in cutting interest rates.’

The Bank of England decision is at midday on Thursday. Elsewhere, there are a slew of flash composite purchasing managers’ index readings, including the eurozone at 0900 GMT, the UK at 0930 and the US at 1345.

In London on Wednesday, shares in sectors sensitive to interest rates and consumer spending rose, following the favourable UK consumer price index data.

Housebuilder Persimmon rose 2.4%, property investor Segro added 2.3%, while retailer JD Sports climbed 2.8%.

Prudential fell 4.5%, despite an earnings beat, with a tough economic outlook in China still hanging over the stock. The Asia and Africa-focused insurer said annual premium equivalents sales - a measure of the new policies sold - rose 34% to $5.88 billion from $4.39 billion in 2022, in line with company-compiled market consensus estimates.

In Hong Kong, APE sales surged to $1.97 billion from just $522 million, which Pru said was due to the removal of all pandemic-related restrictions, in particular the reopening of the land border between the financial hub and mainland China.

New business profit jumped 43% to $3.13 billion from $2.18 billion - ahead of $2.94 billion consensus, while adjusted operating profit rose to $2.89 billion from $2.72 billion - a slight beat compared to consensus of $2.88 billion.

‘The recent sticky patch for the Chinese economy has undermined the business and, to an even greater degree, sentiment towards it. Today’s results should go some way to redressing the balance,’ AJ Bell analyst Russ Mould commented.

Burberry fell 3.3% in a negative read across after an earnings warning from Paris-listed Kering. Kering plunged 12%, dragging larger peer LVMH 1.4% lower.

Back in London, Johnson Matthey rose 7.8%.

Johnson Matthey said it has agreed to sell its Medical Device Components business to Montagu Private Equity, with the proceeds to fund a share buyback.

The London-based chemicals maker said the disposal for $700 million in cash is expected to complete around the third quarter of 2024.

Johnson Matthey said it will return £250 million of that sum to shareholders by means of a share buyback. The balance will be used to repay some existing debt and for other general corporate purposes.

On AIM, Roadside Real Estate shares jumped more than three-fold to 10.20 pence. It announced a partial sale of its Cambridge Sleep Sciences shareholding for £6.0 million, implying ‘significant upside’.

The sale to CGV Ventures 1 will reduce its shareholder to 65% from 75%.

‘Roadside originally invested £2.7 million in CSS in March 2020, in the form of a loan note, which would remain outstanding following completion of the transaction,’ Roadside said.

‘Roadside intends to use the proceeds from the transaction to reduce the company’s debt, following its refinancing.’

Brent oil was quoted at $85.93 a barrel at late in London on Wednesday, down from $87.91 late Tuesday. Gold was quoted at $2,157.96 an ounce, up against $2,155.26.

Thursday’s UK corporate calendar has annual results from retailer Next and insurer Direct Line.

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Issue Date: 20 Mar 2024