DC..L Share News (DC.)

LONDON (Alliance News) - London share prices ended mostly lower on Wednesday, with the market awaiting the Federal Reserve's monetary policy decision at 1900 GMT.

Investors are expecting the Fed to raise US interest rates for the second time since the financial crisis, the first being in December 2015. Fed fund futures have implied a 100% probability of a 25 basis point increase to the target range for Fed funds rate, which currently stands between 0.25% and 0.50%.

The market will also look for clues on potential policy changes that could follow in 2017.

The FTSE 100 index ended down 0.3%, or 19.38 points, at 6,949.19. The FTSE 250 index closed down 0.2%, or 33.24 points, at 17,682.38, but the AIM All-Share rose 0.5%, or 3.99 points, to 825.35.

The BATS UK 100 index ended down 0.2% at 11,774.22, and the BATS 250 fell 0.1% to 16,096.21. The BATS Small Companies closed up 0.2% at 10,402.54.

In mainland Europe, the CAC 40 index in Paris and the DAX 30 in Frankfurt ended down 0.7% and 0.4%, respectively.

In New York, US stocks were lower at the European close. The Dow Industrials and the S&P 500 index were both 0.2% lower, while the Nasdaq Composite was down 0.1%.

"The market is demanding a rate rise and the Fed better deliver it today, for if it doesn't the bank's credibly will be severely damaged," said FOREX.com analyst Fawad Razaqzada.

"There is really no excuse not to do so. Economic data has been improving, financial markets are calm, and [president-elect Donald] Trump's planned fiscal spending will likely put upward pressure on inflation – not to mention the impact of rising crude oil prices," noted the analyst.

The dollar could "absolutely tank" if the Fed does "the unexpected" and holds fire, Razaqzada believes.

The analyst believes that the dollar "may drop anyway" if the expected rate rise is accompanied by a more dovish-than-expected policy statement or projections for the near future.

"I however think this will not be the case. I think the Fed will deliver an upbeat outlook on the economy and the dollar will surge, especially against weaker currencies like the euro," noted Razaqzada.

The pound traded the dollar at USD1.2706 at the London equities close on Wednesday, compared to USD1.2691 at the same time on Tuesday.

The euro was standing at USD1.0655 at the London close, flat compared to USD1.0649 at the close on Tuesday.

Brent oil stood at USD55.05 a barrel at the London close, compared to USD55.48 a barrel on Tuesday. Despite ending below its level at the close on Tuesday, the North Sea benchmark recovered some ground lost earlier in the day after the US Energy Information Administration showed that crude stockpiles in the US declined in the week ended December 9.

The report said US crude oil inventories fell by 2.5 million barrels last week, with economists expecting an decline of 1.4 million barrels.

The data comes after OPEC and non-OPEC countries on Saturday agreed cuts in oil output that supported crude prices.

A report from the US Commerce Department showed that US retail sales inched up by 0.1% month-on-month in November after climbing by 0.6% in October. Economists had expected sales to rise by 0.4%. The uptick in retail sales was partly due to notable increases in sales by food service and drinking places, and furniture and home furnishing stores.

The US Labor Department said its producer price index climbed by 0.4% month-on-month in November after coming in flat in October. Economists had expected prices to rise by 0.2%. Core producer prices, which exclude food and energy prices, also rose by 0.4% month-on-month in November after dipping by 0.2% in October. Core prices had been expected to edge up by 0.2%.

In the UK, figures from the Office for National Statistics showed that the UK unemployment rate was 4.8% in the three months to October, down from 5.2% a year ago, and unchanged from the three months to September.

Average earnings including bonuses increased by 2.5% in the three months to October, above expectations for a 2.3% rise and the 2.4% increase in the three months to September. Earnings excluding bonuses advanced 2.6%, above consensus for a 2.5% rise and the 2.4% rise seen in the three months to September.

The claimant count held steady at 2.3% in November as economists had expected. The number of people claiming unemployment-related benefits rose by 2,400 from October, which was smaller than the expected increase of 6,500.

On the London Stock Exchange, Micro Focus International ended up 4.6% after the business software provider said profit and revenue grew in the first half ahead of its reverse takeover of the software arm of Hewlett Packard Enterprise.

The firm agreed in September a USD8.80 billion reverse takeover deal for the software arm of HP Enterprise. On Wednesday, the company said the HP unit acquisition is on track to complete in the third quarter of 2017.

Outsourcer Capita closed up 4.3% despite being downgraded to Hold from Buy by Jefferies.

Gold miners Polymetal International, up 4.4%, Fresnillo, up 3.2%, and Randgold Resources, up 2.8%, benefited from a rise in the precious metal's price. Gold stood at USD1,163.41 an ounce at the London close, compared to USD1,158.53 an ounce on Tuesday.

Dixons Carphone closed down 6.3%, the biggest blue-chip faller, as the mobile phone and electronics retailer reported growth in profit in the first half of its financial year but pointed to uncertainty ahead.

The firm said that "while we have still not seen any effect on consumer demand as a consequence of Brexit, we have been planning for the possibility of more uncertain times ahead".

Barclays ended down 3.0% after Exane BNP cut the lender to Neutral from Outperform, while Shore Capital reduced its stance to Hold from Buy.

FTSE 250-listed CMC Markets is likely to consider moving a large part of its operations to Germany due to the UK Financial Conduct Authority's proposed crackdown on contract-for-difference products, Sky News reported on Tuesday.

However, such plans are at the "embryonic stage", with no decision to be taken until the end of the FCA's consultation on its proposed rules in 2017, said Sky News.

Sky News also reported that sources said Peter Hetherington, the chief executive of CMC's rival IG Group Holdings, was in Germany on Tuesday to talk to the German financial regulator about proposed contract-for-difference product reforms in Germany.

IG Group Holdings ended up 8.2%, the best mid-cap performer, while CMC Markets ended up 5.2%.

In the UK corporate calendar on Thursday, Centrica, Bunzl, Go-Ahead Group, PZ Cussons, Xaar, Petrofac, and Nanoco Group publish trading statements. Local Shopping REIT releases full-year results and Tungsten Corp issues half-year results.

In the economic calendar, the Nikkei manufacturing Purchasing Manager's Index for Japan is at 0030 GMT. Markit manufacturing, services and composite PMI readings for France, Germany and the eurozone are at 0800 GMT, 0830 GMT and 0900 GMT, respectively. UK retail sales data are at 0930 GMT.

In the US, initial and continuing jobless claims data are at 1300 GMT, as well as the consumer price index and the Philadelphia Fed manufacturing survey. At 1445 GMT is the Markit manufacturing PMI for the US.

Also on Thursday, the Bank of England will announce its latest policy decisions at midday London time, alongside the release of the Monetary Policy Committee meeting minutes. There will be no press conference with Governor Mark Carney.

The resilience seen in the UK economy following the Brexit vote is likely to keep the BoE from making changes to monetary policy, economists believe.

By Daniel Ruiz; danielruiz@alliancenews.com

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