Top flight shares began Friday on the back foot after the US Federal Reserve left the cost of borrowing unchanged.
The FTSE 100 Index fell 11.13 points to 6175 after the Fed surprised markets not only by holding interest rates but also by giving a dovish statement.
Mike van Dulken at Accendo Markets said dealers had expected either a hike with dovish comments or a hold with a warning to be ready for a hike next time.
"The Fed’s surprise decision to hold pat shows external factors clearly outweighing US domestic progress where labour markets have improved markedly and growth is at least present, even if inflation remains suspiciously absent," he said.
The downbeat news from the Fed buoyed the gold price, which rose 1.25% to US$1131 an ounce.
That boosted shares in Randgold Resources, (LON:RRS), up 120p at 3849p. Mexican silver miner Fresnillo (LON:FRES) also brightened 14p to 604p.
Oil prices gave a mixed reaction to the news, with a barrel of Brent crude rising 0.4% to US$49.28 but a barrel of US light crude ceding 0.6% to US$46.62.
Oil major BP (LON:BP.) was 4p down at 341.7p, Royal Dutch Shell (LON:RDSB) leaked 10.5p to 1645p and BG Group (LON:BG.) deflated 7p to 1008p.
Shares in Ferrexpo (LON:FXPO) tumbled 16.5p to 42.5p after the Ukrainian iron ore miner said the Ukrainian central bank had decided to declare the bank that holds more than half its cash insolvent.
Oil and gas company LGO Energy (LON:LGO) spurted 0.02p to 1.32p after telling investors that first half revenues more than doubled to £6.6mln as production in Trinidad increased significantly.
Haydale Graphene Industries (LON:HAYD) ticked up 1.5p to 164p as it won a number of research grants totalling more than £450,000.
MARKET PREVIEW
The FTSE 100 is expected to open the final day of trading week in the red – taking its cue from the US rather than more buoyant Asian markets.
Spread-betting firm IG is predicting the UK blue-chip index will fall around 25 points initially to 6,161.99.
The big news on US interest rates had investors, traders, analysts and economists shrugging and asking, ‘what was that all about?’
The base borrowing rate was left on hold after weeks of will-they-won’t they? speculation ahead of the Federal Open Markets Committee meeting Thursday.
And there appears to have been a degree of unanimity on the subject with only one dissenter.
So the tea-leaf readers will shift their attention to next month. CMC Markets’ commentator Michael Hewson reckons we won’t see any movement from the Fed until December at the earliest.
The ‘downbeat tone’ on the US economy appear to have caught the markets out, though US indices zig-zagged as the attempted to decode the Fed’s message.
The Dow ended the day off 0.4% as did the tech-heavy NASDAQ, while the broader-based S&P 500 fell 0.25%.
In Asia, the Fed’s inaction appears to have perked the markets, with the Shanghai Composite up 0.56% and the Hang Seng in Hong Kong ahead 0.47%. The Nikkei was the outlier as it fell 1.6% amid continuing worries over exports.
Overall, the feeling in the region is the Fed’s move is actually supportive of international equity markets.
“If you’re overweight equities, you probably say: the Fed’s not going to harm us. It’s quite possible that this gets pushed out further and further, into next year,” Shane Oliver, global strategist at AMP Capital Investors, told the Bloomberg financial newswire.
UK Business Headlines
According to the Financial Times insurance group Phoenix has confirmed it is looking at a potential acquisition of its rival, Guardian Financial Services, the private equity-owned “zombie” life assurer.
The Times, meanwhile, has a corker of an angle on the putative takeover of SABMiller, revealing that top executives of the brewer could earn US$1.8bn from the deal. I’ll repeat that – US$1.8bn.
The Times also reckons Rio Tinto is close to agreeing a $4.2bn loan package to construct its huge Oyu Tolgoi underground mine in Mongolia, which was held up by three years of wrangling with the government.
Sticking with mining, that paper said Glencore shareholders have accused the mining group of a “serious breach” of principle in the way it conducted its recent $2.5bn equity placing.
One of the Telegraph’s lead stories emanates from the comments of HSBC’s chairman Douglas Flint, which suggest the bank could retain its domicile in the UK, as his bank mulls moving its headquarters back to Asia.