FTSE 100 close: London index claws back losses ahead of US Federal Reserve interest rate decision

London’s FTSE 100 regained ground this today after nursing sharp losses yesterday driven by fears over the global banking system flaring up again.

The capital’s premier index jumped 0.2 per cent to 7,788.38 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, climbed 0.27 per cent to 19,365.60 points.

Yesterday traders ditched London shares rapidly in the final hours of exchanges after Wall Street opened sharply lower due to concerns about further banking collapses rolling on.

Regional US lenders are being seen as fragile as a result of the US Federal Reserve’s series of aggressive interest rate rises.

Authorities passed through a fire sale of First Republic –  which suffered $100bn of deposit outflows due to its rich clients piling into assets offering better returns – to JP Morgan at the beginning of the week, though that seems to have done little to cushion concerns.

Fed officials this evening UK time are poised to hike interest rates for the ninth time in a row, probably by 25 basis points to a range of five and 5.25 per cent.

“The recent banking crisis may see the Fed look to be more cautious, whilst there has been evidence of disinflation, albeit core readings for price growth remain stubbornly high. Hard to see the Fed be too hawkish until that is resolved, but at the same time it has to keep tight with its inflation message,” Neil Wilson, chief market analyst at Finalto, said.

On the FTSE 100 today, textbook maker Pearson clawed back some of its steep losses registered yesterday, soaring over nine per cent and to the top of the index.

There is a growing consensus among investors that AI tools like ChatGPT could reduce demand for physical and traditional educational resources, pushing Pearson down as much as 15 per cent in London yesterday.

House builder Barratt Developments traded near the bottom of the FTSE 100 after signalling to investors in results this morning its new business pipeline has slimmed as a result of weaker demand in the property market. Its shares dropped around 1.2 per cent.

The pound strengthened about 0.6 per cent against the US dollar.

Oil prices tanked over four per cent, building on yesterday’s steep losses.

“Crude oil prices have continued to slide as the rising prospect of a US economic slowdown raises concerns over future demand. The banking crisis is likely to trigger a tightening of credit conditions which could also constrain economic activity,” Michael Hewson, chief market analyst at CMC Markets UK, said.