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FTSE 100 close: London index runs out of steam ahead of expected Fed interest rate hike

The US Federal Reserve left interest rates on hold for the second meeting in a row.
The US Federal Reserve left interest rates on hold for the second meeting in a row.

London’s FTSE 100 edged higher this morning, before running out of steam later in the day ahead of the US Federal Reserve launching a big week for central banks with an expected 25 basis point interest rate hike.

The capital’s premier index eventually fell 0.17 per cent to 7,758.21 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, rose 0.29 per cent to just under the 20,000 point mark.

Market sentiment seemed to be holding up well despite the world’s most influential central bank poised to nudge borrowing costs higher again after London markets closed.

Higher rates tend to weigh on stocks by making fixed income assets such as bonds more attractive and clouding the outlook for spending in an economy.

Although today’s expected rise will mean the Fed has raised interest rates at each meeting since last March, bets are ramping up on it being the penultimate or final rise in its current tightening, which has been the most aggressive since the 1980s.

“A lot is riding on the Fed dialling back the pace of rate hikes to 25 basis points and there will also be plenty of attention on the surrounding messaging from chair Jerome Powell and his colleagues,” Russ Mould, investment director AJ Bell, said.

The Bank of England is anticipated to follow suit tomorrow with a 50 basis point increase to four per cent, as is the European Central Bank.

“Initial gains have largely given way to modest weakness, on the back of a softer US open as some disappointing earnings serve to act as a drag,” Michael Hewson, chief market analyst at CMC Markets UK, said.

Wall Street’s main Nasdaq, S&P 500 and Dow Jones indexes opened lower.

Ladbrokes and Coral owner Entain shot to the top of the FTSE 100 early doors, advancing nearly three per cent, after results out this morning revealed it had received a boost from punters laying wagers on games at the Qatar 2022 World Cup. However, it shed most of those gains later in the day.

Middle class favourite and online supermarket Ocado placed second on the premier index, scaling 2.17 per cent

Electronics retailer Currys held up the mid-cap FTSE 250 index, gaining over six per cent after fund manager Investec published a positive note on the company.

The pound was broadly flat against the US dollar.

Oil prices slipped around one per cent.