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(Alliance News) - Stock prices in London continued to trend lower at midday on Wednesday ahead of US Federal Reserve's much-anticipated interest rate announcement after the London market close.
US President Joe Biden's USD1.9 trillion spending bill passed by Congress and signed into law last week, combined with vaccine rollouts and reopening of the world's major economies, has fuelled a rally in global equity markets. However, this had led to anxiety about higher inflation and fears central banks will raise interest rates faster than expected.
The FTSE 100 index was down 38.48 points, or 0.6%, at 6,765.35. The mid-cap FTSE 250 index was down 137.46 points, or 0.6%, at 21,627.03. The AIM All-Share index was 0.6% lower at 1,199.22.
The Cboe UK 100 index was down 0.5% at 674.32. The Cboe 250 was down 0.4% at 19,288.66, and the Cboe Small Companies up 0.1% at 13,961.44.
In mainland Europe, the CAC 40 in Paris was 0.1% lower, while the DAX 30 in Frankfurt was up 0.1%.
US stock market futures are set to open mostly lower as investors look for a response from Chair Jerome Powell to the widening of US government bond yields, amid selling pressure on bonds.
The 10-year US Treasury yield topped 1.65% on Wednesday, hitting a new 13-month high.
The Dow Jones Industrial Average is called flat, the S&P 500 down 0.3% and the Nasdaq Composite down 1.1%.
"Stocks in Europe have handed back a little bit of the gains that were posted yesterday as traders await the interest rate decision from the Federal Reserve this evening. Volatility is likely to remain low today as the Fed will be in focus. No change is expected from the US central bank but the commentary in relation to bond yields and concerns about rising inflation will be the centre of attention. The US 10-year yield is back above the 1.63% mark, recent rallies in the yield have put pressure on stocks so if further gains are made from here, equities might endure some pain," CMC Markets analyst David Madden said.
Ahead, the Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1800 GMT. This will be followed by a press conference at 1830 GMT.
Powell has made it clear the US central bank will wait until employment has recovered and inflation is securely above 2.0% before it will roll back its easy-money policy.
Members of the policy-setting FOMC are expected to raise the economic projections they made in December to take into account the US stimulus and improving outlook since then.
The Fed's meeting comes ahead of other central bank meetings later this week, with the Bank of England announcing its policy decision on Thursday and Bank of Japan on Friday.
BK Asset Management's Boris Schlossberg commented: "So far the Fed has insisted that price pressures are temporary and that at present it is best to err on the side of greater rather smaller monetary and fiscal stimulus in order to ensure that the US economic recovery takes off in earnest. The markets however, are already starting to discount a shift towards tighter monetary policy. US 10 year yields continue to make fresh yearly highs nearly every day rising to 1.63% while Fed Funds futures are starting to price in greater chance of rate hikes by 2022 and even end of 2021. The steepening indicates that markets are clearly looking at a hike in rates next year."
In the FTSE 100, BT was up 3.0% after the telecommunication firm's EE mobile unit has secured new 700 megahertz and 3.6 to 3.8 gigahertz band spectrum for GBP452 million, following the principal stage of UK telecoms regulator Ofcom's 5G auction.
Vodafone was up 1.4% after the telecommunications firm won 40 megahertz in the 3.6 to 3.8 gigahertz band for GBP176.4 million.
Ofcom said the total revenue raised from the principal stage is GBP1.36 billion, with all funds to be paid to the UK HM Treasury.
Rolls-Royce was the second best performer, up 3.5%, after JPMorgan raised the jet engine maker to Neutral from Underweight.
Standard Chartered was 2.2% higher after HSBC upgraded the Asia-focused bank to Buy from Hold.
Hargreaves Lansdown was up 0.6% after the fund supermarket said trading in January had been similar to previous lockdown periods, with strong dealing volumes, significant engagement from clients, and robust net new business and net new client numbers.
The retail investment platform said it continued to see elevated volumes of trading since the end of January, with an increased proportion of that directed towards international equities - driven by interest in US stocks from existing clients.
As a result, Hargreaves Lansdown expects pretax profit for the financial year ending June 30, to be modestly above the top end of analyst expectations. The current range of company-collected analyst expectations for financial 2021 pretax profit is between GBP334 million and GBP360 million. Hargreaves posted pretax profit of GBP378.3 million in financial 2020.
In the FTSE 250, Serco was up 1.3% after the outsourcer said it has won a contract to continue providing support services at a military air base in Goose Bay, Canada, for at least 10 more years. The initial 10-year period will be worth as much CAD694 million, equivalent to around GBP400 million.
At the other end of the midcaps, SSP Group was down 5.7% at 326.20p. The travel concessions operator said it plans to raise around GBP475 million via a fully underwritten rights issue. The company said 258.1 million new shares will be offered at the rights issue price of 184 pence per share on the basis of 12 new shares for every 25 existing shares.
The pound was quoted at USD1.3897 on Wednesday at midday, up slightly from USD1.3886 at the London equities close Tuesday.
The euro was priced at USD1.1895, flat from USD1.1894. Against the yen, the dollar was trading at JPY109.20, higher from JPY109.02.
Brent oil was quoted at a USD67.60 barrel at midday Wednesday, down against USD68.28 late Tuesday. Gold was trading at USD1,728.07 an ounce, marginally lower from USD1,729.46.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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