The FTSE 100 closed in the red on Wednesday as markets waited to see whether the US Federal Reserve would dial back the pace of rate hikes in its next interest rate decision, due this evening.
The FTSE 100 index closed down 10.59 points, or 0.1% at 7,761.11 on Wednesday. Meanwhile, the FTSE 250 ended up 45.09 points, or 0.2%, at 19,898.54 and the AIM All-Share closed up 5.40 points, or 0.6%, at 873.22.
The Cboe UK 100 ended down 0.2% at 775.90, the Cboe UK 250 closed up 0.4% at 17,383.46, and the Cboe Small Companies ended down 0.1% at 13,623.02.
The Federal Open Market Committee announces its interest rate decision at 1900 GMT. This will be followed by a press conference with Federal Reserve Chair Jerome Powell at 1930 GMT.
According to the CME FedWatch tool, there is a 99.3% probability that the Fed will lift rates by a quarter of a percent. Should the Fed raise rates as expected, this would take the federal funds rate range to 4.70% to 4.75%.
‘A lot is riding on the Fed dialling back the pace of rate hikes to 25 basis points and there will also be plenty of attention on the surrounding messaging from chair Jerome Powell and his colleagues. Helping the market’s mood on Tuesday was data that revealed slowing US wage growth, another signal that inflationary pressures have peaked,’ explained Russ Mould, investment director at AJ Bell.
US employment growth came in below expectations at the start of the year, figures from payroll processor ADP showed.
ADP’s report showed private sector employment increased by 106,000 jobs in January. Employment growth was below expectations of 178,000, according to consensus cited by FXStreet.
Annual pay increased by 7.3% in January for job stayers, and by 15.4% for those changing jobs. The rate of annual pay growth for job stayers was unchanged from December, but for those changing employment, growth quickened from 15.2%.
Paul Ashworth at Capital Economics said this seems to suggest the easing in labour market conditions is ‘gathering momentum’.
Stocks in New York were lower at the London equities close, with the Dow Jones down 0.7%, the S&P 500 index down 0.3%, and the Nasdaq Composite down 0.2%.
Amid pre-Fed jitters, the dollar faltered. The pound was quoted at $1.2315 at the London equities close on Wednesday, virtually unchanged from $1.2314 at the close on Tuesday. The euro stood at $1.0919, higher against $1.0861.
Against the yen, the dollar was trading at JP¥129.28, lower compared to JP¥130.17 late Tuesday.
In the FTSE 100, Entain rose 1.5% after raising its guidance for 2022 and saying it has entered 2023 with ‘good momentum’.
The Ladbrokes-owner said it expects earnings before interest, tax, depreciation and amortisation for 2022 to be in the range of £985 million to £995 million. It had previously guided for a range of £925 million to £975 million. At best, the new guidance represents a 13% rise from 2021’s Ebitda of £881.7 million.
Chief Executive Officer Jette Nygaard-Andersen said: ‘2022 has been another year of strong financial, operational and strategic progress for Entain. We have continued to grow our revenues in a sustainable and diversified way by expanding our global footprint, broadening our customer appeal, entering new areas of entertainment, and providing a safe environment for our customers. All of this has led to a record number of active customers in Q4, as well as a full year Ebitda performance ahead of our previous expectations.’
Anglo American fell 2.8% as it reported lower rough diamond sales on an annual basis, though sales rose compared to the previous sales cycle.
The mining company said provisional rough diamond sales value for the first sales cycle of 2023 slumped by 32% to $450 million from $660 million in the same cycle last year. But sales in the latest cycle was up 7.9% from $417 million in cycle 10.
‘Consumer demand for diamond jewellery over the 2022 end-of-year holiday season performed well,’ De Beers Chief Executive Bruce Cleaver said. ‘As expected, given the macroeconomic outlook at the time, sightholders took a cautious approach in late 2022 in planning their 2023 allocation schedule, with a greater weighting of goods to be purchased as the year progresses.’
In the FTSE 250, Currys jumped 7.8% as Investec raised the London-based electronics retailer to ’buy’ from ’hold’ with a price target of 93 pence. In contrast, QinetiQ fell 4.7% as Jefferies cut the defence technology company to ’hold’ from ’buy’ with a price target of 390p.
Darktrace finished 5.7% higher. The cybersecurity business announced a share buyback of £75 million and denied allegations made in a report by Quintessential Capital Management on Tuesday.
Quintessential’s questions concern whether Darktrace booked a sale to Italian car maker Maserati in July 2020, the nature of company’s relationship with Dominican Republic-based IT company Multicomputos, whether Darktrace sold anything to ‘suspected shell company’ Alfatrade & Services, which officially is a supplier of clean energy products, and which clients bought Darktrace’s product through Strategic Bridge, among others.
Darktrace CEO Poppy Gustafsson said: ‘We embrace the scrutiny of the public markets. However, it is also important to refute any unfounded inferences about the listed business we are today and push back in the strongest terms on any suggestions that this is a business that is not being run with the greatest integrity.’
Brent oil was quoted at $84.42 a barrel at the London equities close on Wednesday, down from $85.27 late Tuesday. Gold was quoted at $1,928.82an ounce, higher against $1,927.04 at the close on Tuesday.
In European equities on Wednesday, the CAC 40 in Paris ended 0.1% lower, while the DAX 40 in Frankfurt ended 0.4% higher.
According to a flash estimate from Eurostat, consumer price inflation in the eurozone slowed in January.
The eurozone annual inflation is estimated at 8.5% last month, down from 9.2% in December. A year earlier, the inflation rate for January was 5.1%.
Analysts at Oxford Economics said the figures confirm that headline inflation in the EU peaked at 10.6% in October last year and will continue to ease throughout 2023.
‘But as the [European Central Bank]’s attention is gradually turning to core inflation, we think that ECB will remain hawkish in the near term and is going to hike interest rates by 50 [basis points] tomorrow and in March,’ they added.
The ECB will reveal its interest rate decision at around 1300 GMT on Thursday, with markets expecting a 50 basis point hike from the central bank. An hour earlier, the Bank of England will announce its own monetary policy decision.
Markets are also expecting a 50 basis point hike from Threadneedle Street, with World Interest Rate Probabilities suggesting 75% odds for this hike, according to Brown Brothers Harriman.
In the economic calendar on Thursday, alongside the ECB and BoE’s interest rate decisions, there is also weekly unemployment insurance claims from the US at 1330 GMT.
In UK corporate calendar, there are third quarter results from telecommunications firm BT Group as well as full-year results from oil major Shell.
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