THE FTSE 100 closed slightly lower yesterday as investors awaited clarity from the US Federal Reserve over the future of its monetary stimulus programme.
All eyes were on Fed chairman Ben Bernanke’s news conference, in which he was expected to give guidance on the outlook for its quantitative easing programme.
While the expectation was that the US would continue with its asset purchase programme at least until September, investors traded cautiously. Minutes from their most recent meeting showed Bank of England policymakers acknowledged that further market volatility could be on the way because of uncertainty about the direction of US monetary policy.
The threat of an early withdrawal by the Fed has seen the FTSE 100 fall almost seven per cent since mid-May.
London’s blue chip index closed down 25.39 points, or 0.4 per cent at 6,348.82, with banks and miners among the top fallers.
Shares in online grocery company Ocado rose sharply in early trading on rumours of a possible bid from online giant Amazon on the back of a note from broker Cantor Fitzgerald before running out of steam, closing 0.2 per cent down.
Experian, Land Securities, Severn Trent and United Utilities weighed on the FTSE 100 as they traded without the rights to their latest dividend.
BT Group fell 1.8 per cent as the telecoms firm announced chief executive Ian Livingston will step down.
Broker Liberum said Livingston’s departure would prompt short-term uncertainty for investors, with some fund managers wary of replacement Gavin Patterson.
Heavyweight telecoms firm Vodafone shed 1.6 per cent on talk it could offer up to $10bn for Germany’s biggest cable operator Kabel Deutschland in an attempt to trump rival Liberty Global.
Defence firm BAE Systems rose 1.9 per cent after media reports of potential Gulf orders worth up to £5bn, and after the head of rival EADS left open the possibility of a tie-up, traders said.
Despite near-term instability, equity investors remain optimistic over the outlook for the market, with the FTSE expected to top 6,700 by the year-end, a poll found.
“Central bank policies are focusing on growth, and as such we believe that quantitative easing will continue. Such monetary policies will provide a further boost to equities,” Gayle Schumacher at Coutts said.