The FTSE 100 recovered early losses on Wednesday after a terrible session overnight in the US sparked by interest rate concerns following Federal Reserve chair Powell’s hawkish testimony to Congress.

Jay Powell struck a hawkish tone in his delivery and suggested markets should prepare for more 50bps rate hikes, and for rates to remain higher for longer.

“The broad-based rally in stock and bond markets since the October lows rests largely upon their conviction that inflation will retreat, the global economy will suffer no more than a shallow recession (or even avoid a downturn altogether) and central banks will be able to start cutting interest rates sooner rather than later as a result,” said AJ Bell investment director Russ Mould.

“The statement from US Federal Reserve chair Jay Powell to the Senate Banking Committee in Washington on Tuesday challenges this oh-so-cosy consensus and that is why stock markets are stumbling.”

The FTSE 100 was trading at 7,916 at the time of writing, down just 2 points. The index touched lows of 7,891 earlier in the session. The S&P 500 was down around 1.5% overnight in a market reaction to a hawkish Fed chair that was to be expected.

Hiscox

Hiscox was the FTSE 100’s top riser after their gross premiums and premiums written rose in 2022. Poor investment results meant profit before tax fell, but delivery on their strategy ultimately helped shares higher.

“I am very pleased with the progress made across the Group during 2022, as we delivered the strongest underwriting result in seven years. We have a refined strategy, a new experienced and energetic leadership team, we have made significant progress in rolling out new-generation technology in the USA and Europe and we are enjoying our highest employee engagement scores in ten years,” said Aki Hussain, Group Chief Executive Officer, Hiscox.

Hiscox shares were 3.5% higher at the time of writing.

Schroders was the top faller, down 3.4%, after peer Legal & General reported their full year results and provided an insight into the damage Liz Truss’s doomed mini-budget did to their investment business. Legal & General were 2% lower. Schroders reported their results earlier in March.

Legal & General investors booked profits on Wednesday as the company confirmed positive results for 2022 which included a 12% jump in operating profit and a 5% dividend hike to 19.37p.

Legal & General shares were 2% lower on Wednesday after the company’s shares yesterday touched the highest level since the Liz Truss Gilt debacle last year.

L&G shares are roughly 30% higher from the intraday lows recorded in October 2022.

Their higher group operating profit pays testament to L&G’s risk management as they successfully navigated the mini-budget gilt market volatility without suffering a significant level of disruption to their investment business. Legal & General Investment Management operating profit slipped 19% to £340m and Assets under management also fell.

Despite weakness in the investment management business, Legal & General’s cash generation rose 14% to £1.9bn.

“The outlook for the group looks positive, regardless of the impact of last year’s bond market rout. The group are bringing in new assets at pace and pension funds are increasingly looking to L&G to assume their liabilities in exchange for substantial premiums. The group’s Capital business is growing strongly and has maintained asset quality at high levels to date,” said Steve Clayton, Head of Equity Funds at Hargreaves Lansdown.

“The dividend is set to rise 5% this year and next, in line with the group’s stated policy. That puts L&G onto a yield of approaching 7.8%. It is rare to find businesses that can sustain that level of dividend pay-out, but in L&G’s case, the dividend is well covered by earnings and capital generation.”

Admiral shares were sharply lower on Wednesday after the insurance group said profit before tax slumped 39% to £469m due to higher claims and costs.

The group turnover rose 5% to £3.68bn but it wasn’t enough to offset higher average claims and total insurance claims and claims handling expenses of £2.08bn, an increase from £1.5bn last year.

Admiral shares were down around 5% at the time of writing, have recovered from the worst levels of the session.

Discounting the impact of higher insurance claims, Admiral’s top line activities were far stronger than last year with growth in customer numbers to 9.28m.

However, the softer profit ultimately meant a lower full year dividend of 223p per share compared to 247p last year.

“Markets have punished Admiral shares after a 5% miss on profit before tax, and shares were down around 7% in early trading. Higher claims and an increase in the cost of servicing those claims weighed on performance, though to some degree that was already priced in,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

“What spooked markets was the performance of the international business, which management described as having “very low” average premiums, specifically from Italy and Spain. The result for underwriting is an unprofitable position, with total costs exceeding premiums – though Admiral’s unlikely to be the only insurer navigating choppy waters.”

The FTSE 100 was trading slightly higher as we approached the testimony by the Federal Reserve Chair to Congress on Tuesday.

After weeks of company updates, corporate news flow is beginning to wane as most companies have already reported recent results to the market.

The void of major company earnings has paved the way for macroeconomics to become the focus of markets this week and all eyes will be on the Fed Chair and economic data set for release later this week.

Powell has the opportunity to set the market narrative for the coming weeks in his delivery today.

“With investors on tenterhooks about just how far interest rates will rise, and what effect this will have on the world’s largest economy, Fed chair Jerome Powell’s words in Washington as he speaks to senators later are likely to set off a ripple effect through indices,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“Any hint that he’s swirling the latest data and is finding a pattern of inflation that’s stubbornly hard to shift, could trigger fresh falls in equities, and may see bond yields edge up.”

The FTSE 100 was trading 7,957 at the time of writing.

GBP/USD was trading marginally lower as traders bid the dollar higher in anticipation of potentially hawkish comments from Jerome Powell later today.

Recent robust economic data has started to build a consensus the next Fed rate hike will be a 50bps increase – higher than the 25bps hoped for by equity traders at the beginning of 2023.

The lower cable rate provided some support for the FTSE 100s overseas earners. AstraZeneca, Diageo and HSBC were up between 0.5% and 1% on Tuesday.

Melrose was the FTSE 100’s top riser, up 3.6%, ahead of its ex-dividend date this Thursday.