London’s FTSE 100 went into the afternoon flat, with trade lacking conviction ahead of Wednesday’s main event, the Federal Reserve decision.
US monetary policymakers are expected to wrap-up their two-day meeting with a hold to interest rates later.
Before the decision is announced, there is a US jobs report from ADP at 1315 GMT, a precursor to Friday’s nonfarms. Elsewhere, the economic calendar has a German inflation reading at 1300 GMT, a release that will be closely watched by the European Central Bank.
The FTSE 100 index was up 1.65 points at 7,667.96. The FTSE 250 was down 33.57 points, 0.2%, at 19,315.93, and the AIM All-Share was up 0.89 of a point, 0.1%, at 755.78.
The Cboe UK 100 was down slightly at 766.07, the Cboe UK 250 was down 0.2% at 16,782.20, though the Cboe Small Companies was up 0.1% at 14,752.63.
Stocks in New York are called to open mixed, as investors nervously await the Fed’s decision later.
The Dow Jones Industrial Average was called up 0.1%, though the S&P 500 index was called down 0.6%, and the Nasdaq Composite down 1.3%. The Nasdaq is set for a tough open after poorly-received tech earnings overnight.
The US Fed will announce its latest interest rates at 1900 GMT on Wednesday. The US central bank is expected to leave rates unchanged. A press conference with Chair Jerome Powell follows half an hour later.
The key focus will be on the press conference and the outlook for interest rates.
According to the CME FedWatch Tool, there is a 46% chance the central bank lowers the federal funds rate range in March from the current 5.25% to 5.50%. A cut was once the most likely outcome for the March meeting, however.
AJ Bell’s Russ Mould said: ‘Investors may be sitting on their hands as they await the latest decision from the Federal Reserve – a first interest rate cut hasn’t been pegged any earlier than March so all the focus will be on the messaging which accompanies the announcement. The Fed may encourage the recent scaling back of rate cut expectations, and the extent to which it does could determine the path markets forge over the coming weeks.’
It is the Bank of England’s turn on Thursday. The interest rate decision will be announced at 1200 GMT. Alongside the decision, there will also be the BoE’s latest monetary policy report, with economic projections, as well as a press conference with Governor Andrew Bailey half an hour later.
Like the Fed, the BoE is expected to keep rates unchanged and the focus will be on messages about future policy decisions.
Barclays analyst Jack Meaning said: ‘Ultimately, we expect the first cut in bank rate to happen in May, followed by consecutive cuts of 25 basis points per meeting until bank rate reaches 3.25% in March 2025.’
The pound was quoted at $1.2679 at midday on Wednesday in London, higher compared to $1.2665 at the equities close on Tuesday. The euro stood at $1.0838, unmoved against $1.0839. Against the yen, the dollar was trading at JP¥147.77, a touch lower compared to JP¥147.80.
In the FTSE 100, housebuilders were trading higher. Taylor Wimpey added 1.0%, Barratt Developments rose 0.4% and Persimmon climbed 0.3%.
The Nationwide house price index showed a 0.7% increase in seasonally-adjusted UK house prices in January, after showing no change in December. According to FXStreet, market consensus was for the house price index to edge up just 0.1% on-month.
Andrew Wishart, economist at Capital Economics, commented: ‘While the cost of the mortgage needed to buy the average home remains high by historical standards, the rise in house prices at the start of the year shows that declines in mortgage rates have been sufficient for house prices to eke out further gains.’
Elsewhere in the FTSE 100, GSK lost 1.0%.
The Brentford, West London-based pharmaceutical maker said pretax profit climbed 7.7% to £6.06 billion in 2023 from £5.63 billion a year prior. Revenue rose 3.4% to £30.33 billion in 2023 from £29.32 billion.
GSK declared a final dividend of 16.00 pence per share, up from 13.75p in the fourth quarter of 2022. However, this brings the total dividend to 58.00p, down 5.3% from a total payout of 61.25p in 2022.
In the FTSE 250, Harbour Energy lost 4.5%. Goldman Sachs cut the oil and gas company’s stock to ’sell’ from ’buy’.
Amongst London’s small caps, Smiths News rose 3.2%.
The newspaper and magazine distributor said trading in the year ending August 31 remains in line with market expectations.
Smiths said it has secured contract renewals across 74% of its current publisher revenue streams to at least 2029, underpinning revenue in the medium-term, alongside continuing to secure additional national and regional contract awards.
On London’s AIM, Pebble Beach Systems rose 29%.
The provider of content management software for broadcasters and video streaming services said its 2023 trading performance was ahead of market forecasts, with revenue up to £12.4 million from £11.2 million a year earlier.
The revenue generated by Pebble Beach includes recurring revenue of approximately £5.2 million, up 13% from £4.6 million.
In European equities on Wednesday, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was down 0.1%.
Brent oil was quoted at $81.61 a barrel at midday in London on Wednesday, down from $82.32 late Tuesday. Gold was quoted at $2,038.01 an ounce, up against $2,033.15.
Still to come on Wednesday’s economic calendar, there is the US ADP jobs report out at 1315 GMT, followed by the US Chicago purchasing managers’ index at 1445 GMT.
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