- FTSE jumps 98 points, or 1.33%
- US stocks rise ahead of Fed meeting
- International Consolidated Airlines the day’s top performer
4:45 pm: FTSE 100 closes higher as US equities rise
The FTSE 100 closed higher Wednesday as US stocks increased ahead of the US Federal Reserve meeting, with Shell and BP giving the UK blue-chip index a lift.
At the close, the FTSE 100 jumped 98 points, or 1.33%, to hit 7,469.
Chris Beauchamp, chief market analyst at online trading group IG, said the markets “are in a positive frame of mind despite the impending Fed decision” Wednesday afternoon.
“The latest Fed decision is only hours away, but the allure of buying the dip remains too strong for many to resist,” he said.
“Equities have picked themselves up off the lows of the week, with price action around Microsoft providing a template for this week, where initial weakness is replaced with buying. The recent pullback has driven stocks back down towards more attractive valuations, and so long as they can avoid any nasty surprises most earnings may well prompt investors to buy back in.”
The top gainer was International Consolidated Airlines Group (LSE:IAG) SA, which increased by 7.5% to 159p.
4.02pm: UK market off its best but still showing good gains
Leading shares are off their best levels as we head into the close of trading, but are still well up on the day.
Despite concerns about what the US Federal Reserve will say about interest rates later after its two day meeting, as well as worries about tensions in Ukraine, the FTSE 100 is up 1.26% or 92.76 points at 7464.22.
The index is off its high of 7525 and has no longer regained all its losses of Monday, but the mood still remains fairly positive, helped by a strong start on Wall Street.
Travel and hospitality shares are in demand as the UK eases restrictions this week, with British Airways owner International Consolidated Airlines Group (LSE:IAG) still the leading riser in the blue chip index, up 7.25%.
Oil is at a seven year high, with Brent crude up 1.9% to US$89.88 a barrel, helping lift Royal Dutch Shell PLC (A shares) (LSE:RDSA) by 4.84% and BP PLC (LSE:BP.) by 3.61%.
Michael Hewson, chief market analyst at CMC Markets UK, said: "The FTSE100 [managed] to temporarily recover its losses for the week, moving back above its 200-day moving average, as it briefly pushed back above 7,500, although we have started to slip back into the close...
"A decent performance from energy and financials is helping to support the FTSE 100, with firmer energy prices and yields driving the gains on the UK index, with Shell hitting its highest levels since February 2020 and BP also higher.
"We’ve also seen a belated bounce in travel shares after the uncertainty at the beginning of this week, as the imminent dropping of testing for fully vaccinated passengers sees a sharp rally in the likes of IAG, easyJet and Holiday Inn owner IHG."
3.01pm: Bank of Canada keeps rates on hold
Ahead of news on interest rates and tapering from the US Federal Reserve, comes the latest decision from the Bank of Canada.
The Bank has held its rate at 0.25% despite rising inflation and stronger than expected economic growth in Canada in the second half of the year.
But the Bank warned: "Looking ahead, the Governing Council expects interest rates will need to increase, with the timing and pace of those increases guided by the Bank’s commitment to achieving the 2% inflation target."
#Breaking The Bank of Canada maintains its overnight lending rate at 0.25%.
Says economic slack "now essentially absorbed" signaling a rate hike in March.
— Mike Eppel (@eppman) January 26, 2022
2.54pm: US markets recover as investors welcome Microsoft results
US stocks have rebounded after the losses of yesterday amid strong earnings and as traders eye the result of a Federal Reserve meeting.
On Wall Street, the Dow Jones Industrial Average added around 218 points at 34,516. The broader-based S&P 500 added around 53 points at 4,410.
The tech-laden Nasdaq index advanced 296 points at 13,835.
The tech sector was on the up after Microsoft reported better-than-expected quarterly revenue guidance and also posted a profit of US$18.8bn for the last three months of 2021, which beat analyst expectations. Shares in New York gained 5.01% to stand at US$302.94.
The US central bank is poised to conclude its two-day meeting on Wednesday and it is widely expected that no policy changes will be made, but traders will, as usual, be on the look-out for any idea on interest rate hikes – their timings and by how much.
Meanwhile the FTSE 100 continues to head higher and is now up 149.65 points or 2.03% at 7521.11.
2.12pm: UK markets underperform since Brexit day two years ago
It may be a good day on the UK markets today, but it has not been a good two years since Brexit day on 31 January two years ago.
Analysts at interactive investor have crunched the numbers, and they conclude that UK markets have struggled against other major indices in the two years since Brexit, with one exception perhaps being the FTSE Small Cap index, which is up 21.4% compared to 25.7% for the FTSE All World.
By comparison the FTSE 100 and FTSE All Share are up just 2.87% and 3.71% respectively. The S&P 500, meanwhile, is up 35% over the two years.
Only Brazil, Hong Kong and Russia have done worse than the FTSE 100 in the past two years, which has even underperformed UK mid-caps which were thought to be more vulnerable to a Brexit shock.
Interactive said: "The ongoing UK uncertainty from the coronavirus pandemic over the same time period makes it difficult to measure the exact impact of Brexit alone on UK markets and fund performance. And that’s even before recent geo-political tensions around Russia and Ukraine thrown into the mix more, let alone inflationary pressures. But we can certainly see some clear trends.
"The UK market is often well represented by banks, oil and gas producers, miners, and tobacco manufacturers. Less so by large technology companies. This makes the UK’s FTSE indexes a good barometer of the UK’s performance, although even overseas earnings complicate matters.
"Of course, the impact of Brexit is likely to have put off many overseas investors into the UK over the last two years, which is perhaps another reason why the UK has been out of favour for so long."
But things could be picking up. Lee Wild, head of equity strategy at interactive investor, said: "Markets are cyclical, and UK stocks look cheap compared to those overseas. Interest rates are heading higher, supply chain blockages will clear and millions of us will be able to fly abroad this summer. Companies with solid fundamentals like revenue, profits and dividends should do well."
12.24pm: Crude continues to climb
Oil prices continue to move higher as demand increases and geopolitical tensions add to supply uncertainties.
Brent crude is up 0.94% at US$89.03 a barrel while West Texas Intermediate - the US benchmark - has climbed 0.74% to US$86.23.
Craig Erlam, senior market analyst at OANDA, said: "Oil prices are continuing to edge higher after a brief pullback last week. The move followed some turbulence at the start of the week and came as API reported an 872,000 barrel draw which exceeded expectations. Crude prices are once again closing in on $90 and at this point, it doesn't look like we'll be waiting long.
"So immediately it becomes a question how long we'll be waiting for triple figures. The supply/demand dynamics remain favourable and the potential for conflict in Ukraine can only be supportive, as additional risk premiums are priced in. It's still unlikely that oil and gas will be used as a weapon any time soon but if it was, it could lead to a serious surge in prices given how tight the markets are."
11:44am: US markets forecast to open higher
US stocks are expected to claw back some of their recent losses when market trading gets underway as investors anticipate an indication from the Federal Reserve that it will start hiking rates in March at the culmination of its two-day Federal Open Market Committee meeting.
Futures for the Dow Jones Industrial Average rose 1% in Wednesday pre-market trading, while the broader S&P 500 index gained 1.43% and the Nasdaq 100 added 2.14%.
Stocks closed down on Tuesday - though the Dow recovered from a decline of more than 800 points for a second day late in the session.
The index ended 67 points, or 0.19%, lower at 34,298, while the S&P 500 declined 1.22% to 4,356 and the Nasdaq fell 2.28% to 13,539.
“Amid the backdrop of volatile equity markets, it would be tempting for the Fed to kowtow to the sell-off and soften its stance at the conclusion of its two-day monetary policy meeting today," commented Victoria Scholar, head of investment at interactive investor.
"However, the US economy is grappling with four-decade high inflation, a problem that the Fed must remain laser-focused on. At today’s meeting, the Fed is likely to signal plans to begin raising rates in March and to end its quantitative easing stimulus programme this quarter.
“Fed Chair Powell, who has been described as ‘Goldilocks in a suit’, will be treading a fine line, neither too hawkish nor too dovish, displaying credibility in the fight against inflation without spooking the current precarious market mood.”
Meanwhile the FTSE 100 remains strong, up 127.37 points or 1.73% at 7498.83.
11.21am: Mid-cap index also on the way up
The mid-cap index is also in a positive mood, albeit slightly lagging the FTSE 100 which remains up about 1.7%.
The FTSE 250 has climbed 1.59% to 21,990.14, also helped by the rise in travel companies.
Apart from Carnival PLC (LSE:CCL), TUI AG (LSE:TUI) and easyJet plc (LSE:EZJ), the index is also benefiting from a 4.77% rise in Wizz Air Holdings PLC (AIM:WIZZ) after its latest update.
Despite a widening loss, the airline said it was cautiously optimistic heading into the spring.
10.17am: FTSE heads for biggest daily gain for nearly a year
Leading shares have recovered all the losses suffered in Monday's slump.
The FTSE 100 is up 127.53 points or 1.73% at 7498.99 having earlier gone as high as 7506.
If it stays like this, we could see the biggest daily percentage rise since February 15 2021.
Investors seem to be sanguine about interest rate rises, soaring inflation, the tensions in Ukraine, not to mention the Metropolitan Police investigating partygate and the prospect of the imminent report into the scandal from civil servant Sue Gray putting more pressure on Boris Johnson.
Travel and leisure stocks continue to soar after the UK relaxed restrictions this week, with International Consolidated Airlines Group (LSE:IAG) now up 7.91%, easyJet plc (LSE:EZJ) adding 5.53%, cruise company Carnival PLC (LSE:CCL) climbing 6.43% and TUI AG (LSE:TUI) 5.85% better.
Intercontinental Hotels Group PLC (LSE:IHG) is 4.5% higher and Premier Inn owner Whitbread PLC (LSE:WTB) has jumped 4.21%.
Russ Mould at AJ Bell said: "Many countries are taking the view that we need to learn to live with COVID-19 and simply get on with our lives without onerous restrictions. The fact so many people have suffered from the Omicron variant and come out the other side feeling fine after a week or two could install confidence to want to get on a plane and enjoy holidays or travel for business again.
“Changes to UK testing rules have seen a spike in demand for half-term holidays next month, and airlines will be hoping this also leads to greater ticket sales across the year.
“A calmer period on the stock markets has encouraged some investors to look for stocks and sectors that have potentially been oversold, which might explain why many aviation stocks were in demand on Wednesday."
9.11am: Hotels groups in demand
With leading shares continuing on their merry way higher, leisure groups are also among the risers in the wake of the relaxation of UK restrictions.
Intercontinental Hotels Group PLC (LSE:IHG) is 4.67% higher while Premier Inn owner Whitbread PLC (LSE:WTB) is up 3.97%.
But The Sage Group PLC (LSE:SGE) has dipped 0.16% despite reporting a 5% rise in total first quarter revenues and reiterating its guidance for the year.
Overall the FTSE 100 is now up 115.39 points or 1.57% at 7486.85.
AJ Bell investment director Russ Mould said: “The FTSE 100 bounced back sharply on Wednesday, bucking the negative trend set in the US last night and some mixed trading in Asia.
“With today’s US Federal Reserve meeting firmly in view the UK’s flagship stock index has become somewhat dislocated from other global benchmarks thanks to the absence of big technology companies in its ranks.
“For years this under-representation for tech held the FTSE 100 back, now the dominance of relatively cheap tobacco, resources and banking stocks is playing in its favour. For the year to date it is up slightly while the Nasdaq in the US is down double digits.
“How long this trend continues remains to be seen. The Fed’s update comes with the first US rate hike, perhaps of four or five this year, expected in March.
“It remains to be seen if its members will do anything to calm the recent volatility in the markets, particularly given the current tensions between Russia and the Ukraine.
“While its primary job is to keep a lid on inflation, the Fed has shown a willingness in the past to consider the market response when determining its policy.”
8.36am: Miner misses silver production target
Fresnillo PLC (LSE:FRES) has lost its shine after the precious metals miner missed silver production targets and warned 2022 would be lower than last year.
Silver production of 53.1mln ounces in 2021 was below expectations of 53.5mln-59.5mln although gold production of 751,200 ounces, while down 2.4% on 2020, was ahead of guidance of 675,000 to 725,000 ounces.
But with the pandemic hitting its workforce and new labour laws in Mexico limiting the use of contractors, it forecast lower production this year of 50.5mln to 56.5mln ounces of silver and 600,000 to 650,000 ounces of gold.
It said: "We had anticipated a certain level of impact on production as a result of these factors in both the fourth quarter of 2021 and the first quarter of 2022, though we are now likely to see a greater impact in the earlier part of the year than previously expected."
Its shares have dropped 8.99% to 732.6p.
8.17am: Oil and travel shares help lift markets
Leading shares have shrugged off the concerns currently upsetting Wall Street, namely that the Federal Reserve will act more swiftly than expected to try and tame inflation, at the same time as tensions between Ukraine and Russia continue to grow.
The FTSE 100 is up 93.45 points or 1.27% at 7464.91, not far from reclaiming all the losses made on Monday.
With crude continuing to hold firm on supply concerns amid the current geopolitical uncertainty - Brent is up 0.41% at US$88.56 a barrel - oil stocks are among the risers.
BP PLC (LSE:BP.) is 2.4% better while Royal Dutch Shell PLC (A shares) (LSE:RDSA) has risen 2.58%.
Travel shares are also in favour, with British Airways owner International Consolidated Airlines Group (LSE:IAG) up 4.26% and TUI AG (LSE:TUI) ahead by 4.28%.
On the Fed, Ipek Ozkardeskaya, senior analyst at Swissquote, said: "The Fed hasn’t got anything to gain in sending out hawkish messages today: slaughtered equity markets won’t help them to get the inflation situation straight. On the contrary, a deep dive in the financial markets would only [restrain] the Fed from doing what it’s got to do and worsen inflation.
"The hawkish fears include that the Fed could announce the end of the QE taper as soon as today, that it could hint at back-to-back rate hikes instead of one rate hike every quarter, that it could surprise with a 50bp point hike in March instead of a more likely 25bp raise, or it could even choose not to wait until March and hike the rates this week.
"Yet, these hawkish expectations are certainly a bit far stretched; the Fed can’t trigger a financial crisis to fix the inflation problem. There is a greater chance we meet a confident, yet a comforting Fed at today’s announcement. If the Fed wants to carry on with its hawkish plans, it needs to get the risk appetite under control."
The Bank of Canada also meets today, and analysts believe there is an outside chance it could raise rates from the current 0.25%.
Michael Hewson at CMC Markets said: "A move of 25 basis points would certainly be a surprise, but the recent jobs reports have been good, and CPI is already at a thirty year high of 4.8% and will probably go higher. Furthermore, it's already priced into the bond market, and the Bank of Canada has already finished its own bond buying program, so why wait?"
6.50am: UK market set to start higher despite Wall Street woes
The FTSE 100 is seen starting Wednesday firmly on the front foot as volatility remains rife across the markets.
CFD firm IG Markets has the London benchmark up 65 points, making a price of 7,442 to 7,445 with just over an hour to go until the open.
It comes as whipsaw trading continues across the pond and as sentiments are pull from pillar to post with concerns over geopolitics, with events in Ukraine, the worries about inflation and plenty of speculation around the US Federal Reserve’s plans for interest rates.
The Fed meets later today and is expected to throw up some potential trading triggers.
“We are now at the phase where up to 4, and even 5 rate rises this year are being speculated upon by market participants, a scenario that would have been inconceivable back in September, when even the mere prospect of more than two rate rises was being greeted with concern,” said Michael Hewson, analyst at CMC Markets.
“While no changes to policy are expected today, markets will be looking for clues as to how concerned Fed officials are about headline CPI at 7%, and whether they might be leaning towards a potential 50bps hike in March, rather than the 25bps that is currently priced.”
Wall Street yo-yoed on Tuesday, starting sharply lower before recoup a chunk of the morning’s losses. That said, the stock screens were still mostly lit up in red.
The Dow Jones closed the day down 66 points or 0.19% at 34,297, after seeing an intraday low of 33,545.
At the same time, the S&P 500 ended the day down 1.22% at 4,356 and the Nasdaq slide further, losing 2.2% to 13,539. The small cap Russell 2000 index meanwhile lost 1.45% to finish at 2,004.
In Asia, Japan’s Nikkei dipped 0.44% to 27, 011 and Hong Kong’s Hang Seng was ever so slightly higher, edged up 0.08% at 24,262. The Shanghai Composite gained 0.66% to 3,455.
Around the markets
The pound: US$1.3510, up 0.07%
Gold: US$1,846 per ounce, down 0.15%
Silver: US$23.73 per ounce, down 0.76%
Brent crude: US$88.19 per barrel, up 2.2%
WTI crude: US$85.46 per barrel, up 2.5%
Bitcoin: US$37,434, up 3.9%
Ethereum: US$2,461, up 3.6%