The FTSE 100 mustered a small gain, but large-cap peers in Europe returned all of their progress in afternoon dealings.
The mood in Europe turned cautious as the hours until the Federal Reserve’s final decision of the year ticked away.
‘Markets are waiting with bated breath for the US Federal Reserve’s latest interest rate decision and, crucially, the message it sends about when future rate cuts are likely to happen. Whilst most are expecting rates to be held this time round, what’s written between the lines will carry all the import,’ AJ Bell analyst Danni Hewson commented.
‘There’s been quite a bit of treading water going on as investors hope for a bit of clarity that their rate cut expectations are on the money after all.’
The FTSE 100 index edged up 5.67 points, 0.1%, at 7,548.44. The FTSE 250 rose 33.64 points, 0.2%, at 18,695.76, and the AIM All-Share ended up just 0.19 of a point at 724.10.
The Cboe UK 100 ended up 0.1% at 754.25. The Cboe UK 250 also climbed 0.1%, ending at 16,186.37, while the Cboe Small Companies rose 0.3% to 14,113.91.
In European equities on Wednesday, the CAC 40 in Paris and the DAX 40 in Frankfurt each closed down 0.2%.
The US Federal Reserve will announce its latest interest rate decision at 1900 GMT, and a press conference with Fed Chair Jerome Powell will follow half an hour later.
Traders are expecting the Fed to keep interest rates unchanged, and predict the same for the Bank of England and European Central Bank on Thursday.
‘While the probability of a rate change is minimal, today’s focus will be primarily on the release of new economic projections, including the renowned dot-plot as the median expectation among Fed members in September was for rates to conclude 2024 in the 5.00-5.25% range, slightly below the current level. While this forecast is likely to undergo revisions in today’s meeting, the key question is how many rate cuts Fed members anticipate in the coming year,’ XTB analyst Walid Koudmani commented.
‘Presently, money markets are pricing in over 100 basis points of easing for 2024, although Fed members have indicated that such market expectations for rate cuts may be overly aggressive. The market’s reaction will hinge on the new dot-plot, and a contradiction to the Fed’s comments, suggesting 4 rate cuts next year, could prompt a strong dovish response with the US dollar depreciating, while gold and equities rally. Conversely, a dot-plot revealing 1 or 2 cuts for the next year might be viewed as a disappointment, potentially triggering a hawkish market reaction.’
Gold was quoted at $1,983.30 an ounce late Wednesday, up slightly against $1,982.30 on Tuesday.
The Bank of England is expected to keep interest rates on hold in its final meeting of the year, with tepid UK economic data strengthening the case for Threadneedle Street’s next move to be a cut.
The UK economy shrank by more than expected in October, according to figures from the Office for National Statistics.
Gross domestic product fell by 0.3% in October from September, having risen by 0.2% in September from August. This was much worse than expected. According to FXStreet-cited market consensus, analysts were expecting GDP to shrink by just 0.1% in October.
The ECB is expected to enact a second consecutive hold in rates on Thursday, extending a pause of its lengthy hiking cycle, as inflation ebbs closer to target.
Whether the central bank reveals anything on rate cut timing, as well as the future of a key bond buying programme, will also be closely-watched.
The BoE announces its rate decision at 1200 GMT, before the ECB at 1315 GMT. A press conference with President Christine Lagarde follows the ECB decision at 1345 GMT. There is no post-decision conference for the BoE this time.
Elsewhere, Thursday’s economic calendar has Japanese industrial production data overnight, and the latest retail sales and initial jobless claims data from the US at 1330 GMT.
The pound was quoted at $1.2525 late Wednesday afternoon in London, down compared to $1.2549 at the European equities close on Tuesday. The euro stood at $1.0792, up slightly against $1.0789. Against the yen, the dollar was trading at JP¥145.11, down from JP¥145.60.
In London, Entain shares shot up 5.3%. Its chief executive will step down from the post, and shares in the Ladbrokes Coral owner leapt in response, suggesting investor patience in Jette Nygaard-Andersen was wearing thin.
Entain said Nygaard-Andersen’s decision to leave comes after the company entered into a deferred prosecution agreement with the UK Crown Prosecution Service in relation to bribery offences at its former Turkish firm.
HM Revenue & Customs launched an investigation into Entain in 2019. Entain faced allegations relating to bribery offences at its former Turkish unit, sold by a management team in 2017.
Analysts at Davy commented: ‘Entain’s share price has been under significant pressure year to date due to well-documented issues, including an acquisition strategy and resulting equity raise that was poorly received by some investors coupled with slowing organic growth in its online division. Recent market share losses in BetMGM and the delayed timeline of profitability caused further investor concern. Certain investors had raised question marks about the CEO’s performance in the media, so there was something of a sense of inevitability about the change.’
At the other end of the large-cap index, property portal Rightmove fell 4.7% as analysts and investors mull over what’s next for the sector after New York-listed CoStar sealed a deal to acquire OnTheMarket.
CoStar said the acquisition will combine the financial strength, online marketplace experience, and technology of CoStar Group with OnTheMarket’s large network of agents to create a genuine disruptor to the established UK market leaders.
‘The current market leader has grown complacent focusing on margin over innovation, and pricing ahead of value,’ CoStar said.
Aston Martin shares fell 8.9% on a bearish note from HSBC. HSBC maintained its ’hold’ rating on the stock but lowered the price target to 255 pence from 380p.
Shares in the luxury carmaker have slid some 50% since the end of July. Its stock had more than doubled between the end of last year to July 31.
Staffing firm Impellam shares rose 39%. It agreed to a £483.2 million takeover offer from Heather Global, a bidding vehicle for HeadFirst Global.
Equities in New York were on the up, Pfizer and Tesla were two standout underperformers. The Dow Jones Industrial Average was up 0.1% at the time of the European close. The S&P 500 added 0.2%, while the Nasdaq Composite edged up 0.1%.
Pfizer shares slumped 8.3% as it set out weaker-than-expected financial guidance for 2024.
The New York City-based pharmaceutical firm expects 2024 revenue between $58.5 million and $61.5 billion. The outlook is short of the $63.17 billion, the average analyst estimate, according to data by LSEG, formerly known as Refinitiv.
Tesla was down 3.6% at the time of the European equities close. The electric carmaker has initiated a recall of about two million vehicles in the US over a risk linked to its autopilot software, the US traffic safety regulator said Wednesday.
Brent oil was quoted at $73.80 a barrel at the time of the London equity market close on Wednesday, up from $73.61 late Tuesday.
Thursday’s local corporate calendar has a trading statement from distribution firm Bunzl and annual results from electricals retailer Currys.
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