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FTSE 100 bounces out of the red ahead of Federal Reserve rate decision, UK general election

Britain's blue chip index closed out 2.49 points higher at 7,216.25

ftse 100
FTSE 100 closed up a shade, but FTSE 250 slumped on the day
  • FTSE 100 index closes up 2.5 points
  • US stocks mixed
  • Fed interest rate decision in focus
  • UK general election coming

5.10pm: FTSE 100 closes a shade higher

FTSE 100 index closed marginally higher, having been in the red most of the day, ahead of the closely watched US Fed rate decision later.

Britain's blue chip index closed out 2.49 points higher at 7,216.25, just a few hours before campaigning by political parties must cease for tomorrow's (Thursday) general election.

The more UK company-focused FTSE 250  lagged though, plunging 133.98 points at 20,647.11, while in the currency markets, sterling was keeping firm, up 0.14% against the US dollar.

On Wall Street, the Dow Jones Industrial Average is down around 41 points, while the S&P 500 and Nasdaq are ahead by over four and around 13 points respectively

"The mood on Wall Street is muted as traders look ahead to the Fed interest rate decision," noted David Madden, market analyst at CMC markets.

"The US central bank are very unlikely to move interest rates, especially, in light of the fact that inflation is now 2.1% - while their target is 2%. It is the highest CPI reading in one year."

Madden added: "Seeing as we haven’t seen the effect of the three rate cuts that took place between June and October, the US central bank might drop hints that it will keep policy as is for a while."

3.45pm: Footsie back in the green

The FTSE 100 looked to bookend Wednesday’s session by returning at last to the green, after a day of subdued trading before polling booths open tomorrow in the UK general election.

London’s blue chip index got a surprise 1 point boost to 7,215.

Meanwhile, sterling inched up 0.2% to US$1.3177, although down slightly from its day high of US$1.3185.

A fresh YouGov poll today trimmed the predicted lead for Prime Minister Boris Johnson’s Conservative Party in the general election to 43% of the vote, raising fears of a hung parliament.

"Investors are awaiting the outcome of the UK general election (this Thursday) and the market is currently partly pricing a Conservative party victory," said analysts at ING Economics.

"A large Conservative party majority would be perceived as an expected market-friendly outcome and lead to additional sterling gains. A Conservative Party majority of say 30-40 plus would be more positive as it would reduce potential uncertainty around a possible extent of the transition period."

"A hung parliament would lead to a full pricing out of the GBP Brexit resolution premium (which is currently worth more than 2% based on our estimates), a rebuilding of sterling speculative shorts and GBP/USD likely dropping to 1.26," they noted.

2.50pm: US opens low ahead of Fed decision

The FTSE 100 came back up for air, rising over the 7,200 point threshold after earlier struggles as some pre-election nerves set in.

The blue-chip index was still down 7.3 points at 7,206.4, while sterling managed to keep up its rally to $1.3186, 0.2% higher.

Meanwhile, Wall Street was looking hesitant, as the Dow Jones Industrial Average opened about 35 points lower at  27,853, subdued ahead of a Federal Reserve decision on interest rates.

Markets are chewing over the latest inflation data from the US, where the consumer price index came in at 0.3% for November, higher than the 0.2% economists polled by Reuters expected.

In addition to this, concerns are rising over trade talks with China, which must make progress towards a phase 1 agreement before Sunday, in order to avoid another tariff rollout on Chinese goods.

“Overall, core CPI inflation is trending at about 2-1/4%, but the y/y rate will rise in the first half of next year due to a combination of base effects, tariff pass-through and, perhaps, sustained upward pressure in healthcare services,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

“Nothing very terrible is likely, but core inflation could easily hit 2.5% by early spring, for the first time since September 2008,” he added.

The Federal Reserve is also expected to keep interest rates unchanged on account of inflation coming in roundabout its target of 2%, when the decision is announced this evening.

2.25pm: Footsie down as pound strengthens

The FTSE 100 resumed its descent, passing below 7,200 points as it extended the morning’s falls.

As the general election nears and polls still suggest a Conservative majority, the pound has rallied to $1.3174, up 0.1%.

With less than 24 hours to go until polling stations open, bookmaker Sporting Index said that Boris Johnson securing a majority, albeit a reduced one, is looking increasingly likely.

Backing a Conservative majority has been the most popular bet this week, but also puts the Tory seats at 340.5, lower than earlier forecasts which had Boris’ party winning upwards of 365 seats.

As a result of the pound’s strength, the index of London’s blue chips fell 13.8 points to 7,199.96.

1.50pm: US inflation rate hits year-high

London’s blue-chip companies stayed quiet in afternoon trade, remaining modestly in the red after this morning’s general election polls suggested a less stable lead for the Conservative party.

The FTSE 100 was down 6.3 points at 7,207.2, holding off the session low of 7,195.49. but was well below the opening peak of 7,250.67.

Investors instead turned their gaze across the Atlantic, where the US Consumer Price Index (CPI) reading for inflation came in stronger than expected at 2.1%, with data showing households paid more for energy, health care and rent in November.

The consumer price index rose a sharp 0.3% last month, pushing the yearly rise to 2.1% from 1.8% previously, the highest yearly rise since November last year, and above forecasts for 2.0%.

This comes after a weaker year of inflation since CPI reached a six-year peak of 2.9% in mid-2018, which has given the Federal Reserve the space, recently, to cut US interest rates for the first time in over a decade.

Jasper Lawler, head of research at LCG, noted: “US inflation data for November will lay the groundwork for the interest rate decision by the Federal Reserve. A consensus reading for CPI to rise to 2% y/y will be smack on the Fed’s target and justify the likely decision to keep rates on hold."

“The Fed probably doesn’t want to make U-turns an annual habit,” he said, adding “it’s almost a year since the Fed’s massive policy U-turn that saw them switch from a planned tightening cycle to cutting interest rates three times and restarting asset purchases.”

12.10pm: Eyes on US data and rates

The FTSE 100 was treading water, after falling ever since the morning's open as traders faced pre-election jitters, which also saw sterling volatile

London’s blue chip index was still down 7 points, at 7,206.7 points.

Sterling also saw a slight drop of 0.06% to $1.3147 ahead of the general election tomorrow, with recent polls forecasting a Conservative majority, albeit a smaller one than previously thought.

Attention will soon be turned across the Atlantic, however, where US inflation figures are due to come out at 1.30pm (UK time), five and a half hours before the all-important Federal Reserve makes a decision on interest rates.

“The Consumer Price Index (CPI) is tipped to jump to 2% from 1.8%, it is worth noting the Federal Reserve’s target is 2%, so the report could be interesting seeing as the US central bank is due to release its interest decision later on. The core CPI reading is expected to hold steady at 2.3%,” said David Madden, a market analyst at  CMC Markets UK.

But when Jerome Powell announces the Fed’s interest rates decision, it is widely expected that central bank will keep rates on hold.

“The Fed cut rates three time between June and October, and it is fair to say we haven’t seen the impact of the cuts so far, and we are unlikely to do so for a number of months,” said Madden.

Spreadbetters are expecting the Dow Jones Industrial Average to open 12 points higher at 27,893, after yesterday’s session ended on a low over trade concerns, with tariffs set to be slapped on China on 15 December if no deal is reached.

Reports suggest the US is seeking the Chinese government to commit to purchasing agricultural goods before it rolls back tariffs.

11.30am: Footsie fights back

London’s blue chip index regained ground, up 9 points after a mid-morning slump as investors showed their nerves for tomorrow’s general election.

The FTSE 100 was still down 7.6 points at 7,206.2, still subdued by a strengthening sterling.

The pound fought back after a small fall earlier this morning, heading into the green again at US$1.3156.

However, Neil Wilson, chief market analyst at Markets.com said there could still be tears tomorrow: “Sterling will suffer a hard drop if there is anything other than a Tory majority, but whilst there is a risk of a buy-the-rumour, sell-the-fact trade at work,  there should also be a bit more upside should the Conservatives secure a strong majority - a Boris Bounce perhaps.”

“Given that the pound has yet to move anywhere near its post-Brexit highs there is room above, though much will depend on the course of events after the election to secure $1.40 again,” explained Wilson.

“Critically the margin for error is such that a hung parliament is a possibility,” Wilson added.

On Wednesday, Boris Johnson said “it could not be tighter,” when asked about opinion polls showing a narrower lead for the Conservative party.

“I’m just saying to everybody the risk is very real that we could tomorrow be going into another hung parliament, that’s more drift, more dither, more delay, more paralysis for this country,” he said.

The more domestically-focused FTSE 250 suffered worse from the political uncertainty, down 268.42, or 1.29%, to 20,512.67.

10.40am: City jitters continue over election

The Footsie moved further into the red as investor nerves grew over the possibility of a hung parliament in tomorrow’s election, which also restrained sterling.

The index of London’s blue chips fell 16 points to 7,197.7.

Chris Beauchamp, chief market analyst at IG, said: “Another herculean effort of polling analysis points towards a Conservative majority, although smaller than last time, and with such a wide range of outcomes highlighted by the MRP there is still all to play for.”

“But for a market that was confidently predicting a comfortable Conservative majority, the news was a shock”.

Even sterling, which has rallied strongly in the last two weeks as the election draws near, fell back 0.08% to $1.3144 against the dollar.

But Beauchamp said that markets will now be shifting focus to US, where an interest rate decision is expected later today.

“Attention now turns to the Fed meeting tonight, even if little is expected in the way of action.”

“The key for Powell tonight will be trying to avoid any further flak from the White House, but with job numbers growing, and wages rising (albeit not too quickly), the Fed finds itself in a much more pleasant position than a year ago.”

The FTSE 100 index was also kicked lower by JD sports, which lost 9% of its value thanks to reports that its largest stakeholder was selling shares.

9.45am: Conservatives predicted smaller election lead

The FTSE 100 retreated from early optimism, as tomorrow’s general election weighed on markets.

The index of London’s blue chips fell 6 points to 7,207 points.

“Polling, which suggests a hung parliament is still a credible outcome after Thursday’s UK General Election, saw falls for sterling and UK-focused stocks as markets reacted to the threat of renewed uncertainty,” says AJ Bell investment director Russ Mould.

A fresh YouGov poll trimmed the predicted lead for Prime Minister Boris Johnson’s Conservative Party in the general election tomorrow.

Mould added that the “more domestic FTSE 250 is under pressure as investors nervously await the results of the big vote", with sterling 0.02% lower than its recent 7 month highs.

The FTSE 250 suffered a worse slip on election nerves, falling 118 points to 20,663.03, driven underground by falls at Derwent London (LON:DLN) and Riverstone Energy (LON:RSE).

8.35am: Positive start for Footsie

The FTSE 100 made a slightly perkier start than anticipated, though the market is heading into a pre-election lull, according to analysts, with polling happening on Thursday.

The index of UK blue-chips opened 30 points higher at 7,243.73

The narrowing of Boris Johnson's poll lead was expected to have provided a Bromide for the market. But with the survey suggesting the Tories will still have a working majority in the Commons large enough to push through its Brexit plans, it was a case of ‘keep calm and carry on’ – in the Square Mile at least.

Sterling held its head above US$1.31, around a seven-month high, which was indicative of the nonchalant mood in the City.

After hours, the US Federal Reserve is set to make its monthly call on US interest rates, which, according to the commentators, should be a non-event.

With borrowing costs on hold then, economists will pick through Fed boss Jerome Powell’s speech later for signposts pointing to the future direction of travel.

The only sign of unease in London was in the house-building sector with Taylor Wimpey (LON:TW.) and Barratt Developments (LON:BDEV) each marked 2% lower.

Meanwhile, JD Sports (LON:JD) was marked down 7% amid rumours of a placing of shares at 740p by its biggest investor Pentland Group.

Proactive news headlines:

Zanaga Iron Ore Company Limited (LON:ZIOC) has signed a framework agreement with China Overseas Infrastructure Development And Investment Corporation Limited (COIDIC) to explore ways to progress its project in the Republic of Congo. The agreement between COIDIC and Jamelles, the joint venture between Zanaga and Glencore that owns the project, will assess mining and transport infrastructure alternatives.

Faron Pharmaceuticals Oy (LON:FARN) (FIRSTNORTH:FARON) said it was “very encouraged” to discover a drug it is developing to tackle solid tumours can ‘down’ regulate a range of checkpoints that affect the immune system. The data has emerged from the company’s phase I/II MATINS trial of Clevegen, a precision immunotherapy targeting Clever-1 positive tumour associated macrophages (TAMs), which are a class of immune cells present in high numbers in solid tumours.

Kromek Group PLC (LON:KMK) generated revenue growth of 43% in the first half and entered the second with “increasing commercial momentum”. The AIM-listed developer and supplier of radiation detection products said it “expects to deliver significant revenue growth and EBITDA profit for full year in line with market expectations”.

Savannah Resources PLC (LON:SAV) announced that the Minister of Mineral Resources and Energy in Mozambique has issued Mining Licence 9229C to Mutamba Mineral Sands S.A., the second mining license issued for the project in Mozambique, which is held in a joint venture with mining major Rio Tinto plc (LON:RIO). David Archer, Savannah's chief executive officer said: "Having received a second Mining Licence, we're now waiting on a third, which has already been conditionally awarded; together, the three concessions contain an Indicated and Inferred Mineral Resource of 4.4Bt at 3.9% total heavy minerals."

Rosslyn Data Technologies PLC (LON:RDT) expects results this year to hit market expectations even with a slow start to the year for the big data specialist and some order deferrals in its professional services division. A new contract with a rail rolling stock maker and worth £410,000 over a three-year term has started to contribute, while customs planning for Brexit is giving a boost to the Langdons supply chain data business acquired last September.

Europa Oil & Gas Holdings PLC (LON:EOG) is predicting its UK production profile will “more than double” if its Wressle project is approved for development by the next UK government. In a statement to be delivered at its AGM, the AIM-listed oiler, which holds a 30% interest in the East Lincolnshire project, said if the government ruling on the development, expected once the election is out of the way, was positive, it will have a “clear line of sight” towards bringing it into production next year.

Arix Bioscience PLC (LON:ARIX), a global venture capital company focused on investing in and building breakthrough biotech companies, today noted that its portfolio company, Iterum Therapeutics Plc (NASDAQ:ITRM) announced topline results from one of its three Phase 3 trials for sulopenem, Iterum’s lead compound and novel antibiotic for the treatment of gram-negative, multi-drug resistant infections.

BigDish PLC (LON:DISH) has confirmed new chief executive Tom Sumner took up his post at the restaurant booking service at the start of December, with former CEO Sanj Naha now a consultant. The yield management platform developer also clarified the reasons behind its £2.1mln fundraise on 6 June having said in May it was funded to execute its strategy.

Crossword Cybersecurity PLC (LON:CCS), the technology commercialisation company focused solely on cyber security and risk, announces that, at its GM held on Tuesday, the special resolution put to the meeting was passed unanimously.  As a result, the borrowing limits in the articles have been raised to the greater of £1.5mln and 20% of the Adjusted Capital and Reserves. The company said it will now conclude the loan agreements of £1.275mln, as announced on 21 November 2019, for which it now has binding commitments.

6.30am: Muted start predicted 

The FTSE 100 is expected to make a muted start to proceedings with traders keeping their powder dry just a day before the British voting public head to the polls.

“As election day draws near is it likely that volatility will drop-off as traders hunker down,” said David Madden of CMC Markets.

One survey of note – run by the same outfit that called the last result – suggests Boris Johnson’s lead has narrowed markedly.

This is unlikely to have much impact on the stock market, but it took a little of the shine off the pound.

Looking further afield, Asia’s main markets had something of a mixed day as the US-China trade deadlock continued.

“The fact the two sides are negotiating is a positive sign, as it’s when both sides are locked in a stand-off without communication, then traders get nervous,” said CMCs Madden

“As it stands, the US is due to announce on Sunday that there will be tariffs applied to more than US$150bn worth of Chinese imports, but there is chatter of that being deferred.”

After hours London time we have the monthly call on US interest rates, which, according to analysts will come and go with little fanfare with the base rate kept on hold.

That said, economists will undoubtedly pick through the entrails of Federal Reserve chair Jerome Powell’s accompanying narrative for any guidance on the future direction of travel.

Closer to home, Stagecoach’s (LON:SGC) interim results represent the pick of the scheduled corporate news.

Around the markets:

Pound worth US$1.3151

Bitcoin, down 2% at US$7,197.87

Gold US$1,467.70 an ounce, down 40 cents

Brent crude US$63.94 a barrel, down 40 cents    

Significant events expected on Wednesday:

Federal Reserve interest rate decision,

Interims: Stagecoach Group PLC (LON:SGC); Kromek Group PLC (LON:KMK), DWF Group PLC (LON:DWF)

Finals: Autins Group PLC (LON:AUTG)AGMs: Falcon Oil & Gas Ltd (LON:FOG), Minds + Machines Group Ltd (LON:MMX)

Economic data US CPI inflation

City Headlines:

Financial Times

  • Saudi Arabia renews push for $2tn Aramco valuation
  • Lagarde faces investor scrutiny in first ECB meeting
  • Wall Street expects bull run to continue in 2020
  • HSBC to pay US$192mln penalty in US tax evasion case

Times

  • Lloyds forced to reopen fraud compensation scheme
  • World trade court is crippled by Trump’s refusal to approve judges
  • Marks seeks new spark to light up clothing arm

Telegraph

  • London Capital and Finance scandal: almost £20m transferred to four men, it is claimed
  • London Stock Exchange asks traders if they would like to work less

Guardian

  • Pub numbers grow for the first time in a decade

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