Investors take to the sidelines ahead of central bank meetings / Image Source: Adobe

The FTSE 100 was lower on Wednesday at midday despite UK inflation cooling more than expected, ahead of interest rate decisions in the US on Wednesday and in the UK on Thursday.

Stocks in Paris were weighed down by a disappoint profit warning from Kering, which also had an impact on Burberry in London. Prudential shares sunk on the back of its results.

The FTSE 100 index was down 9.75 points, 0.1%, at 7,728.55. The FTSE 250 was up 31.63 points, 0.2%, at 19,464.44, and the AIM All-Share was down 0.40 of a point, 0.1%, at 735.16.

The Cboe UK 100 was down 0.1% at 773.83, the Cboe UK 250 was up 0.1% at 16,891.30, and the Cboe Small Companies was down 0.3% at 14779.12.

In European equities on Wednesday, the CAC 40 in Paris was down 0.5%, while the DAX 40 in Frankfurt was up 0.3%.

All eyes on are on the next US Federal Reserve decision, which will be announced at 1800 GMT on Wednesday. A press conference with Chair Jerome Powell follows shortly after.

Threatening to hog the spotlight, the latest summary of economic projections will be revealed alongside the decision. The SEP features the dot-plot of interest rate expectations of policymakers.

In December, the chart suggested the Fed will enact three cuts this year.

However, Ipek Ozkardeskaya at Swissquote Bank said: ‘Given the recent uptick in inflation, strong economic growth, healthy jobs market and robust earnings, we could see some Fed members plot fewer rate cuts for the year and the latter could tilt the median forecast to two rate cuts this year from three plotted in December.’

Ahead of the interest rate decision, stocks in New York were called to open mixed. The Dow Jones Industrial Average was called down 0.1% and the S&P 500 index down marginally. Meanwhile, the Nasdaq Composite is called up 0.1%.

After the Fed’s decisions, attention will quickly turn to the Bank of England.

The BoE will release its own decision at 1200 GMT on Thursday. Markets are expecting the central bank to keep rates unchanged.

On Wednesday, data showed that UK consumer price inflation was cooler than expected in February.

The consumer price index rose 3.4% in February from a year before, having increased 4.0% annually in January.

Inflation had been expected to decelerate to 3.6%, according to FXStreet-cited market consensus, meaning that the reading was below expectations.

The UK inflation rate hit a recent peak of 11.1% in October 2022. The Bank of England has a 2% inflation target, with the current rate still significantly higher than that.

The inflation reading provided some relief on Wednesday morning, but investors think the BoE is unlikely to change its mind ahead of Thursday’s meeting.

Yet, AJ Bell’s Danni Hewsen said: ‘A much more manageable 3.4%, cooler than had been expected, has already impacted market expectation of how many rate cuts the Bank of England might be able to push through by the end of the year. Money markets are once again pricing in four or even the off chance of five cuts by the end of the year, where yesterday just three seemed possible.’

The pound was quoted at $1.2693 at midday on Wednesday in London, lower compared to $1.2719 at the equities close on Tuesday. The euro stood at $1.0839, down against $1.0860. Against the yen, the dollar was trading at JP¥151.70, higher compared to JP¥150.76.

In the FTSE 100, Prudential sunk 6.7% to the bottom of the index on Wednesday around midday.

On an IFRS basis, total insurance revenue in 2023 climbed 9.6% to $9.37 billion from $8.55 billion in 2022. Prudential swung to a pretax profit attributable to shareholders’ returns of $2.10 billion from a loss of $643 million.

‘We delivered an excellent financial and operational performance in 2023 and deployed increased levels of capital in new business, enhancing core capabilities and expanding distribution. Sales growth has continued in the first two months of 2024,’ said Chief Executive Officer Anil Wadhwani, who joined Prudential in February 2023.

Just behind Prudential was Burberry, down 4.8%.

The luxury fashion brand was down on a negative read across from European counterpart Kering.

The Paris-based luxury goods retailer, which also owns Yves Saint Lauren, issued a profit warning on Tuesday, following a slowdown in Asia.

Kering shares plummeted 13% on Wednesday in Paris.

In the FTSE 250 index, Johnson Matthey rose 8.3%.

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 the other end of the index, Trustpilot lost 9.7%.

Vitruvian Partners has sold 15.5 million shares in the Copenhagen-based consumer reviews platform, at a price of 200 pence each. The shares are worth £31.0 million in total.

Vitruvian was one of the original backers when Trustpilot came to the market back in 2021.

Amongst London’s small-caps, FDM Group dropped 15%.

The IT-focused professional services provider said revenue in 2023 edged up to £334.0 million from £330.0 million a year earlier. Pretax profit climbed to £55.6 million from £45.7 million.

However, FDM’s outlook was gloomy. It said it expects 2024 results to be ‘materially’ below its earlier expectations.

‘Reflecting continuing worldwide macroeconomic and geopolitical uncertainties, market conditions in the early months of the current year have remained soft,’ Chief Executive Rod Flavell added.

Brent oil was quoted at $86.42 a barrel at midday in London on Wednesday, down from $87.91 late Tuesday.

Gold was quoted at $2,153.39 an ounce, down against $2,155.26.

As well as the Fed’s interest rate decision, still to come on Wednesday’s economic calendar there is a eurozone consumer confidence reading at 1500 GMT.

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Issue Date: 20 Mar 2024