Taylor Wimpey Share News (TW.)

LONDON (Alliance News) - Shares in London were higher Thursday midday, while New York was called for a positive open, which would add to gains seen on Wednesday after the US Federal Reserve lifted interest rates for the first time since June 2006 but was dovish in its commentary.

The FTSE 100 index was up 1.5% at 6,150.61 points, the FTSE 250 up 0.8% at 17,206.32 and the AIM All-Share up 0.4% at 721.48.

The US Federal Open Market Committee was unanimous in its decision to raise the target for Fed Funds rates by 25 basis points to 0.25% to 0.50% from 0% to 0.25%. Looking further out, the Fed sees only "gradual" rate hikes in 2016, according to its so-called 'dot plot' of FOMC member forecasts. From there, the policy makers expect even slower rate hikes in 2017-2018.

In its statement, the Fed said it will "assess realized and expected economic conditions relative to its objectives of maximum employment and two-percent inflation" to decide upon further interest rate changes. The FOMC expects economic conditions to support gradual increases to interest rates, but this will depend on incoming economic data.

Investors in Europe and Asia also found seasonal cheer in the Fed's decision, with the CAC 40 in Paris up 2.6% and the DAX 30 in Frankfurt up 3.4%. In Tokyo, the Nikkei 225 index ended up 1.6%, while the Hang Seng in Hong Kong added 0.8% and the Shanghai Composite 1.8%.

After the 1900 GMT decision on Wednesday, Wall Street rallied, with the Dow Industrials ending up 1.3%, the S&P 500 up 1.5%, and the Nasdaq Composite up 1.5%.

On Thursday, US stock indices were called to continue upward, with the Dow and the S&P 500 both seen up 0.4% and the Nasdaq Composite called up 0.5%.

Overall, analysts at Nomura said that the Fed decision "was a neutral to slightly dovish event, due to a market-friendly statement, raising the bar for more hikes as we expected and having it based on inflation".

"We now expect markets to really focus on data more closely. But we sadly believe each subsequent hike is going to feel like lift-off, as the Fed will not be hiking on a predetermined path. Time to sharpen our pencils," said Nomura.

The broker said it sees a second rate hike coming in June as somewhat more likely than a second hike in March.

"However, that decision will depend how much momentum the economy carries into next year, and whether or not signs that inflation really is picking up emerge in the first quarter," noted Nomura.

The first set of US job data post the Fed hike is expected before the US open, with initial and continuing jobless claims due at 1330 GMT. After that, the Philadelphia Fed manufacturing survey is due at 1430 GMT, while the Conference Board leading indicator is at 1500 GMT.

Already released Thursday, official data showed that UK retail sales recovered at a faster-than-expected pace in November.

Retail sales expanded 1.7% in November from October, when they fell 0.5%, the Office for National Statistics said. Economists had forecast a 0.5% rise for November. Sales excluding auto fuel also climbed 1.7%.

On a yearly basis, retail sales volume including auto fuel increased 5%, faster than the 4.2% growth posted in October. Growth was forecast to slow to 3%. Excluding auto fuel, growth in sales improved to 3.9% from 3.2% in the prior month, while it was expected to ease to 2.3%.

The pound spiked higher following the data, but the dollar's strength after the Fed move meant sterling retreat shortly afterwards to USD1.4920. At the close on Wednesday, the pound was at USD1.5002.

Eurozone construction output increased in October after falling in the previous month, figures from Eurostat showed Thursday. Seasonally adjusted construction output climbed 0.5% month-on-month in October, reversing a 0.7% decrease in September, which was revised from a 0.4% drop. In August, output had risen the same 0.5%.

On an annual basis, construction output rose 1.1% in October, much faster than the 0.1% gain in the preceding month, revised down from 1.8%. It was the second successive monthly hike.

The euro was lower against the dollar, standing at USD1.0840. The single currency stood at USD1.0942 at the London close Wednesday.

In London, the FTSE 350 Banks sector index was among the best performing sectors, up 2.5%, after the Fed move, as higher interest rates can benefit banks' net interest margins, a key driver driver of profit. Standard Chartered was up 7.8%, HSBC Holdings up 2.6%, Royal Bank of Scotland Group up 2.5%.

FTSE 100-listed supermarkets were higher again Thursday, having taken a breather on Wednesday from the gains seen on Tuesday, when they benefited from the latest UK market share data from Kantar. J Sainsbury was up 4.7%, Wm Morrison Supermarkets up 3.0% and Tesco up 2.8%.

Capita was up 2.1% after Deutsche Bank upgraded the blue-chip outsourcer to Buy from Hold, saying its returns will be more attractive relative to its peers in 2016.

Late on Wednesday, Capita announced that its offer for Xchanging had lapsed, as it failed to reach the required level of acceptances in the face of a higher offer from Computer Sciences Corp.

House-builders were at the bottom of the blue-chip index, with Berkeley Group Holdings, down 6.3%, Taylor Wimpey, down 1.2%, and Barratt Developments, down 1.1%. Following the decision by the Fed, attention has moved back to the UK economy and the possible timing of a rate hike by the Bank of England, which would make mortgages more expensive for house buyers.

In the FTSE 250, Entertainment One was up 4.9%. The Peppa Pig owner said it has created a new partnership, forming a new film, television and digital content creation company, Amblin Partners, in association with director Steven Speilberg and others.

This extends the company's existing output agreement with studio DreamWorks pictures. Under the agreement Entertainment One will directly distribute Amblin Partner's films, and it will hold a small equity stake in Amblin Partners.

Domino's Pizza Group was adding 3.4%, benefited from an upgraded to Buy from Hold by Berenberg. The broker cited continuing sales momentum in the UK, positive developments in Germany, and a recent pullback in Domino's Pizza shares. Domino's on Tuesday said it has formed a joint venture to acquire Joey's Pizza, the largest pizza delivery operator in Germany, for up to EUR79.0 million.

Elementis was the worst mid-cap performer, down 6.1%. The speciality chemicals company warned its earnings per share for 2015 is now projected to be at the lower end of market expectations as challenging markets continued.

However, the company said it still expects its year-end net cash balance to be higher than the previous year balance of USD64.2 million. Elementis said its operating profit in 2015 has benefited from around USD5 million in one-off gains related to legal settlements and property easements which will not be repeated in 2016.

On the AIM All-Share index, mobile payments company Proxama was the best performer, jumping 54%. The group said it had won a new USD1 million contract with an undisclosed US financial services company and forecast a big jump in revenue for 2015 on a stronger second half of the year.

Proxama said that both its digital payments and proximity marketing divisions had seen a stronger second half, resulting in revenue of over GBP3 million for its full year. For 2014 the company reported revenue of just GBP650,978.

In the red, shares in investment company Concha were down 71%, making it the worst performing AIM stock. The company announced it had opted to terminate talks for a potential investment.

After further talks with the target investee company, it was agreed that it was in both parties interests to terminate talks immediately. Concha's board said it was "disappointed" not to have been able to complete the investment, but it is confident this was in the best interest of shareholders.

By Daniel Ruiz; danielruiz@alliancenews.com

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