UK stocks made a tentative move to the upside on Wednesday as markets prepared for the next instalment of Federal Reserve action and hints of the future trajectory for US interest rates.
The FTSE 100 was trading 0.23% higher at 7,790 at the time of writing.
Economists expect the Federal Reserve to hike rates 0.25% to bring US benchmark rates to 5%-5.25%. While a rate hike is expected, comments by Fed Chair Powell’s news conference will be poured over for hints of whether the Federal Reserve will hike rates again in the near-term.
“The FTSE 100 made a strong start on Wednesday ahead of the latest news on US interest rates,” said AJ Bell investment director Russ Mould.
“The Fed is widely expected to deliver what could be its final rate hike in this cycle of 25 basis points so barring any big shock on that score, the focus will fall on the comments which accompany the decision.
“Confirmation that rates will be put on hold after today, while largely anticipated in the market, could nonetheless give sentiment a bit of a boost. The reverse, on the other hand, could really knock confidence.”
FTSE 100 risers
Pearson shares were 8% higher as the education publishing group continued to whipsaw after reporting results last week.
Afternoon trade on Wednesday saw a plethora of FTSE 100 companies edge higher after yesterday’s sharp sell-off. Vodafone, Burberry, Coca-Cola HBC and Melrose were among the top risers.
Halma was 1.5% higher as the tech group broke to the year’s highest levels.
FTSE 100 fallers
Lloyds was the worst performer on Wednesday as investors appeared less than satisfied with their Q1 results. Although Lloyds profit jumped on higher interest rates, Lloyds left their guidance unchanged for the rest of the year.
The suggestion we may be past the most favourable conditions for Lloyds operations sent shares down 5%.
Haleon was among the top fallers after Pfizer’s Finance Director suggested Pfizer would start offloading their stake in Haleon in the coming months. Pfizer has a 32% stake in Haleon.
Steve Clayton, Head of Equity Funds at Hargreaves Lansdown, explains the impact this would have on Haleon shares: “It would be a slow process, aiming not to depress the Haleon price, but that’s still a lot of stock for the market to absorb. Shakespeare will come to mind for many “if it were done when ‘tis done, then ‘twere well it were done quickly”
“These stock “overhangs” can depress share prices in the short term, but it seems unlikely anyone will not buy a pack of Advil or Tums because Pfizer are thinking of selling a non-core investment.”