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LONDON MARKET CLOSE: FTSE 100 in the green ahead of Fed rate decision

3rd May 2023 16:58

(Alliance News) - Stocks in London were higher at the close on Wednesday as investor waited with bated breath for the US Federal Reserve's next interest rate decision.

The FTSE 100 index closed up 15.34 points, or 0.2% at 7,788.37 on Wednesday. The FTSE 250 ended up 51.37 points, or 0.3%, at 19,365.60. The AIM All-Share closed up just 0.1 of a point at 828.28.

The Cboe UK 100 ended up 0.2% at 778.87, the Cboe UK 250 closed flat at 16,990.58, and the Cboe Small Companies ended up 0.2% at 13,632.18.

"The Fed is widely expected to deliver what could be its final rate hike in this cycle of 25 basis points so barring any big shock on that score, the focus will fall on the comments which accompany the decision," said Russ Mould, investment director at AJ Bell.

The US central bank will announce its decision at 1900 BST. A press conference with Fed Chair Jerome Powell will be held shortly after at 1930 BST.

Investors will be analysing Powell's speech for hints about where the Fed will be going in the future, and at what pace.

"A more dovish stance than initially expected should boost appetite towards riskier assets, while another hawkish wording could significantly dent investor sentiment to stocks and send benchmarks further down," said Pierre Veyret, technical analyst at ActivTrades.

According to the CME FedWatch tool, a quarter-point hike is overwhelming expected, with market seeing just an 15% chance of rates remaining the same.

At its last meeting in March, the Fed lifted US interest rates by 25 basis points in a unanimous decision, taking the federal funds rate range to 4.75% to 5.00%.

The dollar slipped in Europe amid the pre-Fed jitters.

Sterling was quoted at USD1.2543 at the London equities close on Wednesday, up from USD1.2463 at the close on Tuesday. The euro stood at USD1.1057, higher against USD1.0986.

Against the yen, the dollar was trading at JPY135.09, lower compared to JPY136.55 late Tuesday.

Meanwhile, stocks in New York were mixed at the London equities close, with the Dow Jones Industrial Average down 0.2%, the S&P 500 index flat, and the Nasdaq Composite up 0.3%.

In London, Pearson was the top blue-chip performer, up 10%, reserving some of yesterday's steep losses which saw the stock finish 15% lower.

The stock was knocked after shares in online learning service Chegg plunged in New York on Tuesday. Chegg admitted that artificial intelligence chatbot ChatGPT had affected how many students were signing up to its services, leading the company to withdraw its guidance for the full year.

Haleon dropped 2.8% after the Financial Times reported that Pfizer will begin offloading its 32% stake in the consumer healthcare products firm as it focuses on reducing debt linked to its USD43 billion acquisition of Seagen and boosting shareholder returns.

Pfizer Chief Financial Officer Dave Denton told the newspaper it will begin selling its interest within months, but in a "slow and methodical" manner" to prevent undermining Haleon's market valuation.

Haleon was spun-off after GSK and Pfizer combined their consumer healthcare operations in 2019 before opting to list the joint-venture on the London Stock Exchange, leaving GSK and Pfizer with a 13.5% and 32% stake, respectively.

GSK closed down 0.2% in London. Pfizer was 1.0% lower in New York.

Lloyds fell 3.4%, after it reported a sharp drop in customer deposits in the first quarter of 2023.

The Edinburgh-based bank said customer deposits fell by GBP2.2 billion to GBP473.1 billion. This was "including a reduction in Retail current account balances of GBP3.5 billion, partly driven by seasonal customer outflows, including tax payments, higher spend and a more competitive market," Lloyds said.

Nonetheless, Lloyds backed annual guidance of a banking net interest margin over 305 basis points, and return on tangible equity of around 13%. It added that its asset quality remained resilient, and said its portfolio is "well-positioned" in the context of cost of living pressures.

In the FTSE 250, TI Fluid Systems jumped 14% after the company backed its annual outlook, as it reported its first-quarter revenue rose 15% year-on-year to EUR869.8 million.

"The group's performance through Q1 2023 has been encouraging and our outlook for the year remains unchanged, with constant currency revenue growth outperformance compared to [light vehicle production] growth, adjusted [earnings before interest & tax] margins to expand above 6%," TI Fluid Systems said.

Elsewhere in London, Card Factory dropped 5.6% despite reporting a full-year profit rise as the greeting card retailer shook off inflationary pressure and a hit to its online channel from UK postal strikes.

The firm said revenue for the year ended January 31 rose 27% to GBP463.4 million, from GBP364.4 million, while its pretax profit more than tripled to GBP52.4 million from GBP11.1 million the year before.

Looking ahead, Card Factory said trading for the new financial year is "slightly ahead" of expectations, adding it is confident in its ability to withstand inflationary pressures moving forward.

On AIM, Mirriad Advertising shares surged to 4.53p from 1.01p at Tuesday's close.

The in-content advertising company said it has worked with Microsoft to build a new application programming interface, as part of a roadmap for "adopting Microsoft Azure and its AI capabilities for various use-cases".

Mirriad did not disclose any financial details of the collaboration.

In European equities on Wednesday, the CAC 40 in Paris ended up 0.3%, while the DAX 40 in Frankfurt ended 0.6% higher.

After the Fed announces its interest rate decision at 1900 BST, investor attention will shift to the European Central Bank which will reveal its own rate decision on Thursday.

The market is expecting the ECB to slow down its pace of interest rate hikes to a 25 basis point hike, but with sticky inflation and record low unemployment, there remains the possibility of another 50 basis point move.

The Frankfurt-based central bank will announce its decision at 1415 CEST on Thursday. A press conference with ECB President Christine Lagarde will follow at 1500 CEST.

At its last meeting in March, the ECB raised rates by 50 basis points, taking the interest rate on the main refinancing operations, the interest rate on the marginal lending facility, and the deposit facility to 3.50%, 3.75% and 3.00% respectively.

Brent oil was quoted at USD72.01 a barrel at the London equities close on Wednesday, down sharply from USD76.17 late Tuesday. Gold was quoted at USD2,025.44 an ounce, higher against USD2,011.85 at the close on Tuesday, boosted by weakness in the US dollar.

Chris Beauchamp, chief market analysts at IG, said: "Oil prices appear to be the one area really concerned about a recession and a slump in demand, and it seems OPEC will have to think about another cut in production fairly soon if a move below the March lows is to be avoided."

In Thursday's UK corporate calendar, there are first quarter results from oil major Shell as well as trading statements from Next and BAE Systems.

In the economic calendar, there are services PMI prints from the UK and the EU from 0900 BST.

By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [email protected]

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