London close: FTSE dips ahead of Fed rate announcement

London stocks reversed earlier modest gains to end just lower on Wednesday as investors eyed a rate announcement from the US Federal Reserve.

The FTSE 100 finished down 0.1% at 7,761.11.

The Fed’s rate announcement is due at 1900 GMT, while the Bank of England and European Central Bank will make their latest policy announcements on Thursday.

Chris Beauchamp, chief market analyst at IG, said: "The second half of the week’s action-packed schedule has provided a reason for investors to take risk off the table, as they await the Fed decision, and then the other major data that will follow on Thursday and Friday. Caution is the watchword today, and could well be the case tomorrow and Friday too.

"A hawkish Fed and poor tech numbers on Friday would be a decent catalyst for a rout in stocks, while the bulls will be hoping for good news on which to pin a fresh rally."

On home shores, data out earlier showed that shop price inflation hit fresh highs last month as the cost of food soared.

According to the latest BRC-NielsenIQ Shop Price Index, annual shop price inflation was 8% in January, up from 7.3% in December, above the three-month average of 7.5% and a record high.

Within that, non-food jumped 5.1% year-on-year from 4.4% a month earlier, while food surged 13.8%, compared to 13.3% in December. It is the highest inflation rate in the food category on record.

Helen Dickinson, chief executive of the British Retail Consortium, said retailers had reduced discounting in January while input costs had continued to rise.

She continued: "Ambient food inflation accelerated the most, as wholesale and bulk prices grew, particularly for sugar and alcohol. Fresh food prices also remained high due to increased food production costs as well as elevated wholesale fruit and vegetable prices.

"With global food costs coming down from their 2022 high and the cost of oil falling, we expect to see some inflationary pressures easing. However, as retailers still face ongoing headwinds from rising energy bills and labour shortages, prices are yet to peak - and will likely remain high in the near term."

Investors were also mulling a survey showing that activity in the UK’s manufacturing sector shrank in January, albeit less than expected, for the sixth month in a row.

The S&P Global/CIPS manufacturing purchasing managers’ index rose to 47.0 from a 31-month low of 45.2 in December, coming in above the flash estimate of 46.7 but below the 50.0 mark that separates contraction from expansion.

Output and new orders fell further, with leading to job losses for the fourth successive month. The survey found that weak demand, elevated price inflation, and raw material and staff shortages all impacted production.

Rob Dobson, director at S&P Global Market Intelligence, said: "UK manufacturers faced a tough operating environment at the start of 2023, leading to reducing intakes of new business, declining production volumes and lower staffing levels.

"Weak demand at home and overseas, supply chain constraints, strikes and the continuing impact of high inflation all stymied the performance of manufacturers. Weak economic growth in the US, EMEA and across Asia is also dragging down new export wins, exacerbating the strain already caused by port delays and lingering Brexit complications."

Earlier, the latest figures from Nationwide showed that house prices fell for the fifth month in a row, with annual price growth slowing to 1.1% in January as surging interest rates and inflation continued to hammer mortgage holders.

In equity markets, telecoms giant Vodafone fell after it said revenues declined in the third quarter as the economic slowdown hit trading in Continental Europe and offset a good performance in the UK.

GSK dipped even as the drugs giant said fourth-quarter profits came in ahead of expectations, boosted by strong demand for its blockbuster shingles vaccine.

Ladbrokes owner Entain gained after it lifted its full-year earnings expectations as it reported a record fourth quarter for both net gaming revenues and active customers.

ITV rallied after Reuters reported that veteran Hollywood producer Peter Chernin and French TV production company FL Entertainment had expressed interest in the broadcaster's Studios business.

Halma rose after the safety technology company announced the acquisition of Thermocable for its safety sector fire detection unit, Apollo Fire Detectors, for £22m.

Currys shot to the top of the FTSE 250 after an upgrade to ‘buy’ from ‘hold’ at Investec.

Following two days of weakness on the back of a short seller attack, Darktrace traded up as the cyber security firm announced a buyback of up to £75m.

Market Movers

FTSE 100 (UKX) 7,761.11 -0.14%
FTSE 250 (MCX) 19,898.54 0.23%
techMARK (TASX) 4,426.42 -0.89%

FTSE 100 - Risers

SEGRO (SGRO) 850.00p 2.38%
Smiths Group (SMIN) 1,765.50p 2.23%
3i Group (III) 1,610.00p 2.22%
Ocado Group (OCDO) 659.40p 2.07%
RS Group (RS1) 957.50p 1.86%
Johnson Matthey (JMAT) 2,297.00p 1.82%
CRH (CDI) (CRH) 3,820.50p 1.79%
Smurfit Kappa Group (CDI) (SKG) 3,449.00p 1.68%
WPP (WPP) 958.60p 1.57%
B&M European Value Retail S.A. (DI) (BME) 454.50p 1.52%

FTSE 100 - Fallers

Anglo American (AAL) 3,387.00p -2.29%
Vodafone Group (VOD) 91.18p -2.08%
Compass Group (CPG) 1,894.50p -1.89%
Rio Tinto (RIO) 6,202.00p -1.85%
Auto Trader Group (AUTO) 615.40p -1.85%
Haleon (HLN) 318.55p -1.76%
Fresnillo (FRES) 807.60p -1.68%
Burberry Group (BRBY) 2,421.00p -1.63%
Abrdn (ABDN) 209.20p -1.60%
Reckitt Benckiser Group (RKT) 5,694.00p -1.32%

FTSE 250 - Risers

Currys (CURY) 69.80p 7.80%
Wetherspoon (J.D.) (JDW) 479.00p 5.46%
Network International Holdings (NETW) 277.60p 5.23%
Senior (SNR) 159.60p 4.59%
Darktrace (DARK) 219.50p 4.42%
Clarkson (CKN) 3,205.00p 4.23%
Moonpig Group (MOON) 125.00p 3.73%
FDM Group (Holdings) (FDM) 811.00p 3.31%
Marks & Spencer Group (MKS) 150.10p 2.95%
SSP Group (SSPG) 265.80p 2.63%

FTSE 250 - Fallers

Hochschild Mining (HOC) 64.50p -5.63%
QinetiQ Group (QQ.) 342.80p -5.51%
Lancashire Holdings Limited (LRE) 600.50p -3.92%
UK Commercial Property Reit Limited (UKCM) 55.80p -3.46%
TI Fluid Systems (TIFS) 115.00p -3.36%
Tullow Oil (TLW) 34.98p -3.21%
PureTech Health (PRTC) 246.50p -3.14%
CMC Markets (CMCX) 235.00p -2.89%
Indivior (INDV) 1,892.00p -2.72%
888 Holdings (DI) (888) 70.00p -2.71%