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(Alliance News) - Stocks in London got off to a modestly higher start on Wednesday, with trade muted as markets are in wait-and-watch mode ahead of the US Federal Reserve's latest policy decision.
"The biggest risk event of the day is the upcoming FOMC statement. The Federal Reserve will announce its monetary policy decision later today, and the expectations are that the Fed is going to cut the interest rate by 25 basis points. This will be the second interest rate cut by the Fed during this year," commented Naeem Aslam at ThinkMarkets.
The FTSE 100 was up 13.19 points, or 0.2%, at 7,333.59 early Wednesday. The FTSE 250 was up 34.98 points, or 0.2%, at 20,075.52, while the AIM All-Share was down 0.2% at 882.87.
The Cboe UK 100 index was up 0.2% at 12,435.95. The Cboe UK 250 was up 0.2% at 17,957.22, and the Cboe UK Small Companies flat at 10,936.78.
In mainland Europe, the CAC 40 in Paris and DAX 30 in Frankfurt were both down 0.1% in early trade.
In Asia on Wednesday, the Japanese Nikkei 225 index closed down 0.2%. In China, the Shanghai Composite ended up 0.3%, while the Hang Seng index in Hong Kong is flat.
"The real question is if we are going to see another interest rate cut by the Fed in 2019, and this is where the majority of the focus is going to be among traders," said Aslam, adding that the Fed may be "somewhat reluctant to pull the trigger again for another interest rate cut during 2019".
An interest rate decision from the US Federal Reserve is due at 1900 BST, followed by an press conference with Fed Chair Jerome Powell at 1930 BST.
The latest update from the Fed will come after the New York Federal Reserve Bank on Tuesday pumped billions of dollars into financial markets for the first time in more than a decade to keep short-term US interest rates in line with the Fed's target range.
The emergency interventions on money markets – one early Tuesday and another scheduled for Wednesday morning – came as a sudden cash shortage drove up interest rates. The shortage threatened the Fed's control over a crucial tool it uses to transmit monetary policy to the wider economy as the target range helps set borrowing costs across the financial system.
The New York Fed authorized repurchase agreements – known as "repos" – to provide liquidity in an effort to keep the Fed's benchmark lending rate "within the target range of 2 to 2-1/4%." It was the first such operation since September 2008.
Elsewhere in the economic calendar on Wednesday, UK inflation is at 0930 BST and eurozone inflation at 1000 BST.
Sterling was quoted at USD1.2466 early Wednesday ahead of the data, soft compared to USD1.2478 at the London equities close on Tuesday.
UK Prime Minister Boris Johnson is set to defend his controversial decision to suspend Parliament for five weeks at the UK's highest court on Wednesday.
Lawyers representing Johnson will argue that his advice to the Queen to prorogue Parliament was lawful and that, in any event, the court cannot interfere in political matters.
The Supreme Court in London is hearing historic appeals from two separate challenges brought in England and Scotland to the prorogation of Parliament.
Johnson says the five-week suspension is to allow the government to set out a new legislative agenda in a Queen's Speech when MPs return to Parliament on October 14. But those who brought legal challenges against the prime minister's decision argue the prorogation is designed to prevent parliamentary scrutiny of the UK's impending exit from the EU on October 31.
In London, stocks were muted ahead of the Fed decision.
B&Q owner Kingfisher was down 1.1% after reporting a fall in both interim revenue and profit.
Total sales were down 1.4% to GBP6.00 billion in the six months to July 31, and 1.8% lower on a like-for-like basis. Retail profit declined 4.8% to GBP466 million, while pretax profit was down 13% at GBP245 million.
In the FTSE 250, Cobham shares were down 1.0% after the UK government decided to intervene in the takeover of the defence firm on national security grounds.
Secretary of State for Business, Energy & Industrial Strategy Andrea Leadsom has issued a European intervention notice to intervene in the deal, and has written to the UK competition regulator instructing it to investigate.
The UK Competition & Markets Authority will prepare a report on the national security aspects of the proposed transaction, and has until October 29 to do so.
Andrea Leadsom said the decision came following "careful consideration", adding that the government's goals are "to support private sector innovation whilst safeguarding the public interest".
Sirius Minerals was the worst mid-cap performer for the second day in a row, shares down 11% after news on Tuesday that it failed to carry out a crucial financing. The stock had shed 53% on Tuesday.
Engineer Weir was down 2.1% after JPMorgan cut the stock to Neutral from Overweight.
Elsewhere in London, Pendragon shares slumped 12% after a "challenging" first half.
Revenue for the first half of 2019 fell 0.8% to GBP2.46 billion from GBP2.48 billion a year ago, with the company swinging to a loss of GBP32.2 million from a GBP28.4 million profit. Driving the swing to loss were impairments amounting to GBP102.5 million.
On a like-for-like basis, sales were up 2.9%, with used car sales up 3.9% and new cars up 1.7%.
"The first half of FY19 has been challenging for the group, with financial performance impacted by a combination of issues. The principal driver of the group's performance was the reduction in the level of used car stock to more appropriate levels," Pendragon explained.
The firm decided to skip its interim dividend, last year having paid out 0.8p.
Economic and market conditions are "very challenging", Pendragon continued, with customer confidence not expected to pick up over the remainder of 2019. As a result, the firm's underlying pretax loss for 2019 is now expected "at the bottom" of board expectations.
