18th Dec 2024 16:58
(Alliance News) - The FTSE 100 showed early promise but faded into the close ahead of an expected interest rate cut in the US later on Wednesday.
While the Federal Reserve is likely to lower rates by 25 basis points, attention will be focused on hints as to the path ahead with investors fearful of a January pause.
The FTSE 100 index closed up just 3.91 points at 8,199.11. The FTSE 250 ended 59.13 points higher, 0.3%, at 20,601.99, and the AIM All-Share gave back 2.62 points, 0.4%, at 719.42.
The Cboe UK 100 ended down 0.1% at 822.61, the Cboe UK 250 rose 0.2% at 18,100.28, and the Cboe Small Companies shed 0.5% at 15,963.07.
In European equities on Wednesday, the CAC 40 in Paris ended up 0.3%, while the DAX 40 in Frankfurt ended down slightly.
Stocks in New York were higher on Wednesday at the London equities close. The DJIA was up 0.3%, the S&P 500 index was 0.2% higher and the Nasdaq Composite rose 0.1%.
The Federal Reserve is widely expected to cut US interest rates later Wednesday, with analyst focus switching to the year-ahead. The central bank issues its decision at 1900 GMT. A press conference with Chair Jerome Powell follows shortly after.
The CME FedWatch Tool, reflecting market opinion, puts the chances of a quarter-point cut at around 99%. A 25 basis points cut would bring the target range for the federal funds rate to 4.25-4.5%.
Susannah Streeter at Hargreaves Lansdown said there's an "expectation that the central bank will go slower next year, given the strength of the US economy."
"The uncertainty unleashed by Trump's win and the potential inflationary effects of his planned tariffs is part of the reason for caution. So, comments from chair Jerome Powell will be watched closely later for clues as to the pace of further monetary easing, although guidance is likely to be limited given the unpredictability Donald Trump's policy making."
But Citi thinks Powell is likely to sound more dovish than market expectations, keeping January "live" for a potential cut.
"With the unemployment rate back to its cycle high, any weakness could have the market quickly pricing back in more rate cuts in 2025," the broker thinks.
The pound was quoted lower at USD1.2692 at the London equities close Wednesday, compared to USD1.2707 at the close on Tuesday. The euro eased to USD1.0473 against USD1.0498.
Against the yen, the dollar was trading higher at JPY154.03 compared to JPY153.57 late Tuesday.
In London, investors were assessing inflation data ahead of the Bank of England's own rate call on Thursday.
UK consumer price inflation accelerated in line with expectations in November, although core inflation and services inflation surprised on the downside, figures showed.
According to the Office for National Statistics, the consumer prices index rose by 2.6% in the 12 months to November, picking up pace from a 2.3% rise in the 12 months to October. The figure was in line with FXStreet-cited market consensus.
On a monthly basis, CPI rose by 0.1% in November, slowing from 0.6% growth in October.
The largest upward contribution to the monthly change in CPI annual rates came from transport, the ONS said.
Core CPI, excluding energy, food, alcohol and tobacco, rose by 3.5% in the 12 months to November, accelerating from 3.3% in October. Core inflation had been expected to rise to 3.6%.
The closely watched CPI services annual rate was unchanged at 5.0%, below the 5.1% market expectation.
"CPI inflation accelerated, largely driven by base effects in core goods. While momentum softened, underlying services remained resilient. In its totality, we expect today's data to add to the MPC's conviction to hold rates tomorrow and retain maximum optionality in its guidance," analysts at Barclays remarked.
The BoE's Monetary Policy Committee concludes its two-day meeting on Thursday. It is widely expected to leave interest rates unchanged at 4.75% when it announces the decision at 1200 GMT.
"The BoE rate decision appears to be one of the easier central bank calls this week. We expect no change in rates with an 8-1 vote (risks of 9-0). The recent data on price pressures will vindicate a measured, meeting-by-meeting approach and the case for higher for longer," Bank of America said.
On the FTSE 100, National Grid eased 1.1% as it laid out proposals to invest up to GBP35 billion in its electricity transmission network between 2026 and 2031.
The London-based electricity and gas supplier intends baseline investment of over GBP11 billion to maintain and upgrade existing networks, plus pipeline investment of GBP24 million.
The latter includes around GBP15 billion to increase network capacity, and also includes additional potential projects that may be triggered by the UK government's evolving priorities.
National Grid said the framework proposals to UK energy regulator Ofgem represent an "unprecedented" level of investment.
Do-it-yourself retailer Kingfisher rose 0.5% after selling its Brico Depot Romania business to Altex Romania for an enterprise value of around GBP58 million.
RBC Capital Markets noted while it is small business it is loss making from both a retail profit and a free cash flow perspective.
"Kingfisher has faced challenges scaling this business and the market backdrop for home improvement remains tough, so we view this as a small positive for the wider group."
Elsewhere, Shoe Zone plunged 39% as it cut its profit expectations in half and said the UK government's budget policies have forced it to close some stores.
The Leicester, England-based footwear retailer cut its adjusted pretax profit expectations for the financial year ending in September 2025 in half to "not less than" GBP5.0 million from GBP10.0 million.
National World climbed 1.9% as it agreed a GBP65.1 million offer from Media Concierge.
Brent oil was quoted higher at USD74.01 a barrel at the London equities close Wednesday from USD72.70 late Tuesday.
Gold was little changed at USD2,637.13 an ounce on Wednesday against USD2,637.16 on Tuesday.
Thursday's UK corporate calendar sees a trading statement from outsourcer Serco.
Thursday's global economic calendar has the UK interest rate decision, plus US GDP and quarterly personal consumption expenditures and weekly jobless claims figures.
By Jeremy Cutler, Alliance News reporter
Comments and questions to [email protected]
Copyright 2024 Alliance News Ltd. All Rights Reserved.