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UK's FTSE 100 jumps ahead of Fed decision as miners, financials advance

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By Reuters
UK's FTSE 100 jumps ahead of Fed decision as miners, financials advance
UK's FTSE 100 jumps ahead of Fed decision as miners, financials advance   -   Copyright  Thomson Reuters 2022

By Amal S and Bansari Mayur Kamdar

-London’s FTSE 100 rose to near two-week highs on Wednesday as prospects of peace talks between Russia and Ukraine and Chinese stimulus lifted investor sentiment globally, while investors awaited the U.S. Federal Reserve’s policy decision due later in the day.

The blue-chip FTSE 100 climbed 1.6%, with base metal miners and banks leading the gains, while the domestically focused mid-cap index advanced 3.2%.

The Fed is expected to raise interest rates for the first time in three years later on Wednesday and give guidance on future tightening.

“Focus will be on Fed’s inflation forecast for next year and 2024, as that will provide insights into whether it sees (inflation) on the back of Ukraine crisis as something short term or more structural,” said Stuart Cole, head macro economist at Equiti Capital.

Base metal miners jumped 2.9%, lifted by supply concerns and promises of more economic stimulus in top consumer China, while banks, which are likely to benefit in a higher interest environment, rose 3.4%. [MET/L]

The sharp turnaround in Chinese markets also boosted financial stocks that do a lot of business in the region like Prudential and Standard Chartered, according to Michael Hewson, chief market analyst at CMC Markets UK.

With inflation rising to 40-year highs and data showing a drop in the UK unemployment rate below pre-pandemic levels, investors are widely expecting the Bank of England to lift interest rates by 25 basis points on Thursday.

Among individual stocks, Avast fell 13.3% after Britain’s anti-trust regulator launched an in-depth probe into U.S. cybersecurity firm NortonLifeLock Inc’s $8.6 billion purchase of the company.

Defense company BAE Systems fell 3.6% on hopes around the Russia-Ukraine peace talks, after rising nearly 28.4% so far this year.

IG Group shed 0.8% after the online trading platform forecast full-year revenue to “moderately” exceed expectations, as the Ukraine crisis increases market volatility, but it predicted slower growth on its U.S. platform.