LONDON (Alliance News) - UK stock indices closed lower Wednesday, with the backdrop of the Greek financial crisis continuing to put investors on edge as they look ahead to the evening's interest rate decision and press conference from the US Federal Reserve.
The Fed is due to announce its interest rate decision at 1900 BST alongside its latest economic projections. At 1930 BST Fed Chair Janet Yellen will host a press conference.
Most analysts believe the Fed will keep interest rates on hold for now due to the weak economic data seen in the first quarter, with the first rate rise expected in September. However, the language and message relayed through the Federal Open Market Committee's announcement and Yellen's press briefing will likely guide sentiment during the late US equities session and at the open in Asia and Europe on Thursday.
"There's plenty of scepticism about the idea that [the Fed] will really hike rates this year. Sure, the latest Bloomberg survey of economists has only 17 of 83 respondents expecting rates to be unchanged in September, but clients remind me that the consensus view has been wrong a few times already," said Societe Generale strategist Kit Juckes.
"The risk at this evening's FOMC meeting is, that while the underlying economic vies are reasonably upbeat and consistent with 'lift-off' happening in September, the (in)famous 'dot-path' will be lowered enough to be the main talking point," Juckes added.
The so-called dot path shows the FOMC members' expectations for future interest rates.
The FTSE 100 closed down 0.4% at 6,680.55, the FTSE 250 closed down 0.2% at 17,706.17, and the AIM All-Share index closed down 0.1% at 766.61.
In Europe, the CAC 40 in Paris closed down 1.0%, and the DAX 30 in Frankfurt ended down 0.6%. On Wall Street, the DJIA, S&P 500 and Nasdaq Composite were all up 0.2% when the European equity markets closed.
The Greek central bank Wednesday warned that a failure by the country's leaders and its creditors to reach a bailout deal would lead to its exit from the euro area and most likely the European Union, just a day before eurozone finance ministers gather for crucial talks on the future of Greece.
"The conclusion of a new agreement with our partners is of the utmost importance to fend off the immediate risks to the economy," the Bank of Greece said. "Failure to reach an agreement would, on the contrary, mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country's exit from the euro area and - most likely - from the EU," it added.
Greece would then "snowball into an uncontrollable crisis, with great risks for the banking system and financial stability," the bank said in a statement on its monetary policy for 2014-15.
Eurozone finance ministers are set to meet in Luxembourg on Thursday. But lawmakers and officials suggest any breakthrough is unlikely that could unlock an EUR7.2 billion aid tranche for Greece.
The pound rose strongly against its major trading partners after UK unemployment data held steady at its lowest level in nearly seven years while the increase in average earnings was the strongest in four years in the three months to April.
The ILO jobless rate for the February to April period was 5.5%, which was down from 5.7% for the three months to January. The unemployment rate was in line with economists' expectations and was the lowest since April-June 2008, when the figure was 5.4%. The number of unemployed declined by 43,000 from the previous three months to 1.81 million, the lowest since the June to August period of 2008.
Average earnings including bonuses grew 2.7% year-on-year during the three months to April. Economists had forecast 2.1% growth. The latest increase was the highest since June to August 2011, when pay grew 2.7%. Excluding bonuses, pay grew 2.7% in the three months to April, the highest since December to February 2009.
At the London close, the pound traded at USD1.5700 and EUR1.3962.
Berkeley Group Holdings ended the day as by far the best performer in the FTSE 250, closing up 10.0%. The housebuilder joined its peers in reporting higher profit and revenue for its last financial year as its average selling prices rose strongly and it booked gains on land and asset sales, and it said the clear UK election result had underpinned its outlook.
The company reported a pretax profit of GBP539.7 million for the year to April 30, up from GBP380.0 million a year before, as revenue grew to GBP2.12 billion, from GBP1.62 billion.
The positive news helped to support fellow housebuilders. Persimmon closed up 1.6%, the best performer in the FTSE 100, and Barratt Developments up 1.2%.
Betfair Group closed down 3.9%, one of the worst mid-cap performers. The online gaming company reported growth in pretax profit in its recently-ended financial year as a rise in customer numbers led to double-digit sales growth in all three of its divisions. It posted a pretax profit of GBP101.2 million in the year to April 30 from GBP61.1 million the year before, as revenue rose 21% to GBP476.5 million from GBP393.6 million.
However, Panmure Gordon cut the company to Hold from Buy, saying it thinks revenue growth will be slow moving forward, while competition will increase due to reduced industry profit margins caused by the UK point of consumption tax.
Furthermore, shares in the company had hit an all-time high on June 2 and has seen little support since.
Cap-XX ended as the biggest gainer in the AIM All-Share index, up 62%, as it said it was "very encouraged" by initial industry feedback for its recently launched range of Thinline supercapacitors, after it shipped sample units for evaluation to manufacturers of wearable devices, energy harvesters and smart credit cards.
AGA Rangemaster was the third-best performer in the whole London market, closing up 31%, after it said it is in discussions with US food service equipment firm The Middleby Corp regarding a possible cash offer for the British maker of iconic range cookers.
The Middleby Corp is based in Elgin, Illinois and makes bakery and other commercial use ovens as well as U-Line wine cellars and drinks cabinets and Viking range cookers for the home. It has until 1700 BST on July 15 to announce a firm intention to make an offer for AGA Rangemaster or walk away.
In the economic calendar Thursday, UK retail sales are due at 0930 BST, eurozone first quarter labour cost data at 1000 BST and the latest uptake in the European Central Bank's long-term refinancing operation at 1015 BST. In the afternoon there is US initial and continuing jobless claims at 1330 BST and US inflation data at 1430 BST.
In the corporate calendar there are full-year results from European electrical goods retailer Darty, home shopping and education supplies company Findel, bathroom supplies company Norcros, investment firm Charles Stanley, Liontrust Asset Management and Poundland Group. Poundland will also be issuing first quarter results. Electronics components distributor Premier Farnell releases an interim management statement.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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19 Jul 2016 11:39
