(Alliance News) - Stock prices in London closed lower on Wednesday as investors await the US Federal Reserve's latest interest rate decision before the Bank of England and the ECB make their respective decisions on Thursday.
The FTSE 100 index closed down 0.1%, or 6.96 points at 7,495.93. The FTSE 250 ended down 0.3%, or 48.37 points, at 19,037.92, and the AIM All-Share closed down 0.2%, or 2.04 points, at 836.55.
The Cboe UK 100 ended up slightly at 750.01, the Cboe UK 250 closed down 0.1% at 16,450.20, and the Cboe Small Companies ended up 0.1% at 12,896.22.
The Fed will announce its decision at 1900 GMT. It is widely expected to raise rates by 50 basis points rather than the larger 75bps hikes it has chosen at its last four meetings.
CMC Market's Michael Hewson commented: "European markets have undergone a rather subdued session ahead of tonight's Fed rate decision, where it's widely expected we'll see a downshift to a 50bps rate hike, as inflationary pressures subside.
"There is a concern that Powell may well deliver a hawkish statement designed to push back on market expectations of an imminent softening of the Fed’s position, in an attempt to reset market optimism, which in turn could well put downward pressure on markets overnight," Hewson said.
In European equities on Wednesday, the CAC 40 in Paris ended 0.2% lower while the DAX 40 in Frankfurt ended 0.3% lower.
Stocks in New York were higher at the London equities close, with the DJIA, S&P 500 and Nasdaq Composite all up 0.7%.
The dollar weakened. The pound was quoted at USD1.2410 at the close on Wednesday in London, higher compared to USD1.2378 at the stock-market close on Tuesday.
The euro stood at USD1.0660, higher against USD1.0643. Against the yen, the dollar was trading at JPY134.82 lower compared to JPY135.10.
Gold was priced at USD1,810.74 an ounce, lower against USD1,813.25.
Anxiety around the Fed's approach going forward offset any optimism from a cooling in UK inflation in November compared to October's record high.
The consumer price index rose by 0.4% in November against the previous month. Annually, CPI grew by 10.7%.
Both the annual and the monthly increases undershot FXStreet-cited market consensus of 0.6% and 10.9% rises, respectively.
In October, prices rose by 11.1% against the previous year, the highest annual inflation rate since the National Statistics series began in January 1997.
The inflation print comes just a day ahead of the Bank of England's latest interest rate announcement. It is expected to follow the Fed's lead and raise rates by 50 basis points.
City Index and FOREX.com's Fawad Razaqzada commented: "With inflation remaining above 10%, could the MPC surprise the markets and hike by 75bps? While that could be a possibility, it is worth pointing out that the UK is facing several other risks too, which may encourage the BoE to proceed less forcefully. In addition to double-digit inflation, the UK is dealing with the various strikes across the nation. Nurses, rail workers, border force and others either have or are threatening to strike over conditions and pay. The UK has summonsed the military and civil servants to try and fill some of these positions over the holidays...Knowing the risks, this may discourage the hawks among the MPC from voting for a bigger hike."
On the FTSE 100, BT finished top of the pile, up 2.5%.
BT expanded its partnership with Nokia's AVA Analytics division in a five year deal.
Nokia said the software for fixed networks will help the London-based telecommunications company strengthen its network monitoring through artificial intelligence and machine learning. Nokia also said it would improve subscriber experience.
"Our expanded partnership with Nokia is another demonstration of our commitment to providing the best customer experience by investing in AI, analytics, and other state-of the-art technology," said Nick Lane, managing director for consumer customer services at BT.
Aveva ended 0.2% higher.
Its planned takeover by Ascot Acquisition, an indirect subsidiary of French energy management company Schneider Electric, satisfied all regulatory conditions.
The takeover of Cambridge, England-based industrial software firm Aveva remains subject to the sanction by a court and the delivery of the sanction to the registrar of companies.
Aveva said the court hearing is scheduled for January 16. It expects the takeover to complete on January 18.
Tui closed 8.0% lower.
Despite reporting a narrowed loss and a large increase in revenue, investors were concerned about Tui's outlook in an inflationary environment.
For the twelve months ended September 30, the Hanover-based holiday operator posted a pretax loss of EUR146 million, narrowed from a loss of EUR2.46 billion a year prior. Revenue multiplied to EUR16.55 billion from EUR4.73 billion after Covid-19 travel restrictions were lifted.
AJ Bell's Russ Mould said: "Bookings are up on pre-pandemic levels and a big increase in prices will help cushion the impact on TUI of rising input costs. The question is whether this pricing power lasts. In 2022 holidaymakers have been willing to pay what it takes to get away for the first time in what feels like an age. However, if prices move too high then affordability becomes an issue."
Watches of Switzerland ended 5.4% lower.
The Leicester, England-based luxury watch retailer reported double-digit rises in both interim profit and revenue, boasting "ongoing" market share gains.
In the six months that ended on October 30, it reported revenue of GBP765 million, up 31% from GBP586 million the previous year. Total pretax profit rose 28% to GBP83 million from GBP65 million.
Mould commented: "Watches of Switzerland is investing heavily for the future by opening new showrooms and expanding geographically as it can see big opportunities. This isn’t a one-off craze, investing in watches is a trend that’s been in motion for decades. Its latest results show a business in perfectly decent health. Prices and volumes are up, and management has reiterated 2023 guidance which is becoming a rarity in a world where earnings forecasts are being downgraded across multiple industry sectors."
Brent oil was quoted at USD82.51 a barrel at the close in London on Wednesday, up from USD81.03 late Tuesday.
On Thursday the Bank of England and the European Central Bank announce their interest rate decisions. There's also US industrial production at 1430 GMT.
In the corporate calendar there's half year results from Currys and half year results from Biffa.
By Chris Dorrell, Alliance News reporter
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