London’s FTSE 100 closed in the red as investors await the latest interest rate decision from the US Federal Reserve later today, while big tech results last night soured risk sentiment.
The FTSE 100 ended 0.47 per cent lower at 7,630.57 while the midcap FTSE 250 index, which is more aligned with the health of the domestic economy, closed up slightly at 19,357.95.
Markets were holding their breath ahead of the latest rate decision from the Fed. The US central bank is likely to leave rates on hold, but could signal an imminent change in policy.
As Ian Sheperdson, chief US economist at Pantheon Macroeconomics, said “the Fed probably will abandon the idea of further hikes today, but won’t commit to easing timing”.
Rates have been left on hold for three consecutive meetings, meaning the federal funds rate remains in a range of 5.25-5.50 per cent – its highest for 22 years.
However, inflation has come down faster than expected. Last week’s GDP figures confirmed that the core PCE index, the Fed’s preferred gauge of inflation, rose at an annual rate of two per cent.
Sheperdson commented: “We expect Chair Powell today to say that inflation has continued to fall; we think he will be happy to note that the core PCE deflator rose at a 2.0 per cent annualized rate in both Q3 and Q4. This progress gives the Fed the peg on which to hang a material dovish shift in the statement”.
Investors were digesting the results overnight from US tech giants Alphabet and Microsoft.
“Results from Microsoft and Alphabet last night soured risk sentiment,” Jim Reid, analyst at Deutsche Bank commented.
“Both of the tech giants narrowly beat revenue and earnings estimates, but saw an underwhelming reaction in after-hours trading,” Reid continued. Traders were concerned by lower advertising revenue at Alphabet while the rising costs of investment in AI worried Microsoft investors.
In London GSK upgraded its guidance for the years ahead after delivering full year results ahead of expectations.
The London-listed pharmaceutical giant was boosted by its new RSV vaccine, which generated £1.2bn in the year. Its shingles vaccination meanwhile made £3.5bn, up 17 per cent on the year before. Its shares closed up 2.0 per cent.
Vodafone meanwhile rejecteda revised offer from Italian firm Iliad to combine the two companies’ Italian divisions. In its revised proposal, Iliad offered Vodafone €6.6bn for its Italian business and also dropped demands that would have given it great control over the venture.
Shares in Vodafone closed 2.1 per cent lower.