(Alliance News) - Stocks in London ended mixed on Wednesday with investors expecting the US Federal Reserve to cut interest rates for the second time in 2019.
The central bank will announce its interest rate decision at 1900 BST and is widely expected to cut rates by one quarter percentage point to a range between 1.75% and 2%.
With the second day of the policy meeting underway, the Fed again had to inject funds into the US financial market amid a cash crunch that threatened to push short-term interest rates to break out of the Fed's target range.
US Federal Reserve Chairman Jerome Powell has sent strong signals in recent weeks that a rate cut is coming, vowing that policymakers stand ready to "act as appropriate" amid "significant risks" to the economy - notably President Donald Trump's trade war with China.
"Given Chairman Powell's hawkish slant it's unlikely that he will assume a deeply accommodative posture and that should keep the dollar bid unless the equity markets commence a sharp selloff in which case risk aversion flows could reverse any knee jerk bounce. Regardless of the outcome, given the great anticipation ahead of the event today's presser could prove to be volatile as traders navigate the many crosscurrents that are driving capital markets currently," said BK Asset Management's Boris Schlossberg.
The FTSE 100 index closed down 6.35 points, or 0.1% at 7,314.05. The FTSE 250 ended up 13.89 points, or 0.1%, at 20,054.43 and the AIM All-Share closed down 0.46 points, or 0.1%, at 884.03.
The Cboe UK 100 ended flat at 12,415.19, the Cboe UK 250 closed down 0.3% at 17,973.99, and the Cboe Small Companies ended up 0.2% at 10,952.69.
Stocks in New York were lower at the London equities close, with the DJIA down 0.2%, the S&P 500 index down 0.2% and the Nasdaq Composite down 0.3%.
"Markets are in their traditional pre-Fed quiet period, awaiting the latest decision from the US central bank. As investors continue to work out the impact from the Saudi Arabia attacks, it's clear that many have decided to simply wait out the first half of the week, and the liquidity operations of the past two days have only added to this sense of unease," said IG Group's Chris Beauchamp.
In the FTSE 100, British Airway parent International Consolidated Airlines Group closed up 1.7% after BA pilots called off a strike due next Friday.
Members of the British Airline Pilots' Association, or Balpa, were due to walk out for 24 hours on September 27, following a 48-hour stoppage last week.
Balpa said the strikes had demonstrated the "anger and resolve of pilots" but it was now time for a period of reflection "before the dispute escalates further and irreparable damage is done to the brand".
At the other end of the large cap index, Kingfisher ended the worst performer, down 2.5% after the DIY retailer reported a decline in sales during a mixed first half for its retail units.
In the six months to July 31, revenue fell by 1.4% year-on-year to GBP6.00 billion from GBP6.08 billion. Pretax profit fell by 13% to GBP245.0 million from GBP280.0 million.
On a like-for-like basis, sales fell by 1.8%, with growth at UK trade tools provider Screwfix and in Kingfisher's operations in Poland and Romania offset by declines in France and at British DIY retailer B&Q.
Housebuilders ended in the red after data showed UK house prices rose at a slower annual rate in around seven years in July, according to official figures.
Taylor Wimpey, Barratt Developments, Persimmon and Berkeley Group closed down 1.8%, 1.4%, 1.3% and 0.3% respectively.
Four regions in England - the South East, London, the East and the North East - saw property values fall over the 12 months to July.
The average UK house price was was GBP233,000 in July, a 0.7% year-on-year increase.
This is the lowest annual rate since September 2012, when it was 0.4%, according to the report released jointly by the Office for National Statistics, Land Registry and other bodies.
In the FTSE 250, Royal Mail closed down 4.0% after the postal operator criticised a union for preparing industrial action, ahead of a ballot of union members.
Royal Mail said the Communication Workers Union is to ballot members to go on strike, with all members to be balloted. The earliest start date for the ballot is September 24.
Over 100,000 Royal Mail workers are members of the union, well over half the company's 162,000 employees.
The pound was quoted at USD1.2476 at the London equities close, flat compared to USD1.2478 at the close Tuesday.
On the economic front, UK inflation fell short of expectations in August, coming in at a rate well below the Bank of England's 2% target.
The UK consumer price index rose 1.7% on an annual basis in August, statistics from the Office for National Statistics showed, slowing from 2.1% in July. This was the lowest rate of inflation since late 2016.
Share Centre analyst Tom Rosser said: "The ONS said the largest downward contributions were from some recreational and cultural goods such as games, toys and clothing. Investors will, however, be looking to next month's release as the recent jump in crude oil prices resulting from the Saudi drone strike will likely feed directly into inflation figures.
"Following today's news, all eyes will shift to tomorrow as the Bank of England announces the latest Interest Rate decision. It's unsurprising Brexit and the slowdown in global growth will still remain the dominant factors in their thinking."
On Thursday, the Bank of England will announce its latest monetary policy decision, alongside the release of the Monetary Policy Committee meeting minutes, at midday. There will be no press conference with BoE Governor Mark Carney following the decision.
It is widely expected the nine-strong MPC will vote to maintain the UK Bank Rate at 0.75% at its last meeting before the October 31 Brexit deadline.
ING said the fact that wage growth is running close to post-crisis highs is a larger consideration for the BoE.
Released last week, data showed UK average weekly earnings in the period from May to July grew 4.0% on an annual basis including bonuses, the highest since the 2008 financial crisis.
"This is the main reason why the Bank of England will likely retain its notional tightening bias at tomorrow's meeting - and also suggests it's too early to pencil in rate cuts in the UK. Equally though, the ongoing uncertainty surrounding Brexit, and mounting concerns over global growth, suggests the prospect of any further policy tightening is also still quite a long way off," said ING.
The CAC 40 in Paris and DAX 30 in Frankfurt both ended up 0.1%.
The euro stood at USD1.1057 at the European equities close, flat against USD1.1051 late Tuesday.
Eurozone inflation was stable in August at its lowest level in nearly three years, data from Eurostat showed, confirming the preliminary estimates released on August 30.
Headline inflation was 1.0% in August, the same as in July. The rate was the lowest since November 2016.
Brent oil was quoted at USD64.16 a barrel at the London equities close, down from USD65.36 at the close Tuesday following news that Riyadh will get its two major installations back online earlier than expected.
The North Sea benchmark was retreating from the high of USD69.64 reached earlier in the week following an attack on Saudi Arabian oil facilities.
Saudi Arabia said it will unveil evidence on Wednesday linking regional foe Iran to attacks on key oil installations, as US Secretary of State Mike Pompeo heads to the kingdom to discuss possible retaliation.
Riyadh, which is in the midst of a five-year war against Tehran-aligned rebels in neighbouring Yemen, has said the weapons used in the strikes were Iranian-made, but has so far not directly blamed its arch rival.
However, the Saudi defence ministry said its spokesman would present evidence from the site of the weekend attacks that halved Saudi oil production, sending global energy markets lower.
Late Tuesday, Energy Minister Prince Abdulaziz bin Salman said international investigators, including from the UN, were joining the probe, having announced that output would return to normal by the end of the month.
"Brent continued to give back gains from the start of the week. Investors continued mulling over the timeline set by Saudi Arabia to return oil supply to previous levels. The fact that oil has dropped indicates that traders are confident that Saudi Arabia's can stick to the proposed timeline. Oil is now trading around USD2 above where it was prior to the drone attack. This reflects the heightened tensions in the Middle East, the increased risk premium. With the US showing no signs of a hot-headed retaliation oil, could settle around these levels," City Index analyst Fiona Cincotta said.
Gold was quoted at USD1,507.01 an ounce at the London equities close, up from USD1,503.58 late Tuesday.
The economic events calendar on Thursday has the Bank of Japan's interest rate decision at 0400 BST, UK retail sales at 0930 BST and the SARB interest rate decision at 1400 BST.
The UK corporate calendar on Thursday has annual results from construction company Kier Group, interim results from clothing retailer Next and a trading statement from online spreadbetting firm IG Group.
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