FTSE 100 edges tentatively higher ahead of Federal Reserve rates decision

On Wednesday, the FTSE 100 shook off poor UK GDP data to tentatively gain as investors braced for the Federal Reserve’s interest rate decision this evening.

The Federal Reserve is not expected to change interest rates. But that doesn’t make the decision and accompanying commentary any less important.

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Markets will be fixated on the Federal Reserve for any hints of their thinking around the trajectory of interest rates, and, crucially, when the Federal Reserve will first cut rates in 2024.

London’s leading index gained 0.3%, while the German Dax added 0.05%.

“The FTSE 100 ticked higher as investors await the latest decision from the Federal Reserve on interest rates,” said Danni Hewson, head of financial analysis at AJ Bell.

“So far, the market is seeing nothing to disabuse it of the notion that rate cuts are on the way in 2024 as US inflation came in as expected yesterday and UK GDP figures show the economy is weakening faster than anticipated. 

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“To what extent Fed chair Jerome Powell and his Bank of England counterpart Andrew Bailey seek to dampen these expectations could well determine the trajectory of stocks heading into the end of the year.”

The Bank of England is due to announce its interest rate decision on Thursday, but like the Federal Reserve, is not expected to amend the base rate.

FTSE 100 movers

Gaming group Entain was the FTSE 100 best performer on Wednesday after CEO stepped down following the settlement of a bribery case relating to their Turkish business. Entain shares jumped as much as 4% on Wednesday.

Investors could observe weakness in UK focused stocks including B&M European Value and Rightmove as profit takers took the poor UK GDP as a trigger to book recent gains.

B&M fell 6%, and Rightmove slipped 4%.

Rolls Royce slipped marginally as investors booked profits after a rip-roaring run. Rolls Royce is the FTSE 100’s best performer of 2023.

There was mild favour for defensive stocks, with utilities and pharma rising while cyclical banks and miners fell.

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