London close: FTSE succumbs to sterling gains ahead of expected US Fed rate rise

The FTSE 100 succumbed to mild sterling strength along with lingering political and Brexit uncertainty to finish Wednesday lower.

If blue chips began on a positive bias, their trajectory soured as the afternoon wore on. At the end of session, the FTSE 100 was down 0.35% to 7,474.40, and the FTSE 250 was up 0.58% to 19,974.70.

This was in keeping with key European stocks indices, while Wall St opened lower ahead of the Fed Reserve likely lifting its benchmark interest rate later tonight.

"The FTSE 100 started out strong, but it has given up all its gains as the rally in the pound hit the main equity benchmark," said David Madden, market analyst at CMC Markets UK.

He and others noted the political flux at No.10, after PM Theresa May's snap election last week produced a hung parliament.

There would be no announcement today on the talks between the Tories and the Democratic Unionist Party due to the fire tragedy in west London.

"Whenever the political uncertainty is cleared up in the UK we will see investor confidence pick up again," said Madden.

This was set against a weave of disappointing economic data. In the three months to April, UK average earnings rose just 1.7%, versus confirmation yesterday of inflation at 2.9%. Bank of England was seen standing pat on rates tomorrow.

Much of this macro woe denting consumers' wallets was linked to sterling's dive after the Tory-called non-binding Brexit referendum last year. The Tory-called election's outcome also saw sterling dive, again.

"There is a fear that UK consumers will be squeezed even more if we see oil prices turn higher," said IG analyst Joshua Mahony.

Meanwhile, global markets are looking ahead to the US Federal Reserve's interest-rate call tonight at 19:00 BST, with policymakers widely expected to rise.

"The US inflation and retail sales readings threw a spanner in the works this afternoon, undermining the case for a Fed rate hike just as Janet Yellen and co. are gearing up to pull the trigger," said Connor Campbell, financial analyst at Spreadex.

"It is unlikely that this data-slump will halt the Fed’s long signposted rate hike this evening," he said.

"However, it may cause the central bank to strike a tone far less hawkish than initially planned, something that in turn could delay a potential interest rate increase in September."

Meanwhile, on the corporate front, miners such as Anglo American, Glencore, Rio Tinto and BHP Billiton were falling with the price of three-month copper.

Oil majors BP and Shell sank on a double-whammy of US crude inventories data. Banks were also softer, but to the upside it was house builders, commercial property and insurers prominent.

An encouraging update from Bellway provided a fillip to the rest of the sector, lifting peers on the top-flight index such as Barratt Developments, Taylor Wimpey and Persimmon.

British American Tobacco advanced after saying earnings for the half year have been lifted by exchange rates and that it expects to outperform the industry with its interim results later this month.

CLS Holdings rose as it announced the acquisition of a portfolio of 12 office buildings for €148m, while Aggreko powered ahead after saying it has acquired Indonesia-based power rental company KBT for up to $32.8 m.

London Stock Exchange Group gained as Barclays upped its target price on the stock to 4,060p from 3,700p following the company's capital markets day earlier this week.

Micro Focus was under the cosh after Citigroup downgraded the stock to 'neutral' noting the shares have outperformed the FTSE 100 by around 14 percentage points since the HPE deal announcement.

Market Movers

FTSE 100 (UKX) 7,474.40 -0.35%
FTSE 250 (MCX) 19,974.70 0.58%
techMARK (TASX) 3,597.13 0.46%

FTSE 100 - Risers

Barratt Developments (BDEV) 594.00p 3.21%
Centrica (CNA) 202.90p 2.99%
Direct Line Insurance Group (DLG) 364.30p 2.94%
Old Mutual (OML) 204.70p 2.76%
Admiral Group (ADM) 2,115.00p 2.67%
Fresnillo (FRES) 1,680.00p 2.38%
Smurfit Kappa Group (SKG) 2,366.00p 1.81%
Associated British Foods (ABF) 3,022.00p 1.79%
Marks & Spencer Group (MKS) 369.30p 1.68%
Sage Group (SGE) 698.00p 1.68%

FTSE 100 - Fallers

Anglo American (AAL) 1,059.00p -2.62%
Glencore (GLEN) 286.65p -2.60%
Rio Tinto (RIO) 3,142.50p -2.33%
BP (BP.) 461.60p -1.82%
BHP Billiton (BLT) 1,178.50p -1.79%
Standard Chartered (STAN) 756.10p -1.72%
Royal Dutch Shell 'B' (RDSB) 2,142.00p -1.70%
Antofagasta (ANTO) 796.50p -1.61%
Micro Focus International (MCRO) 2,374.00p -1.45%
Ashtead Group (AHT) 1,577.00p -1.44%

FTSE 250 - Risers

Acacia Mining (ACA) 293.70p 7.86%
ZPG Plc (ZPG) 373.30p 6.02%
Bellway (BWY) 3,020.00p 5.96%
esure Group (ESUR) 300.20p 5.41%
Vectura Group (VEC) 119.20p 4.75%
TalkTalk Telecom Group (TALK) 175.40p 4.09%
Countryside Properties (CSP) 337.10p 3.88%
Aveva Group (AVV) 2,028.00p 3.84%
Stagecoach Group (SGC) 210.80p 3.64%
Derwent London (DLN) 2,886.00p 3.44%

FTSE 250 - Fallers

Tullow Oil (TLW) 164.60p -4.30%
Evraz (EVR) 186.00p -3.53%
Kaz Minerals (KAZ) 510.00p -3.13%
Halma (HLMA) 1,143.00p -2.97%
Ferrexpo (FXPO) 187.70p -2.39%
Man Group (EMG) 153.70p -2.23%
Weir Group (WEIR) 1,835.00p -2.19%
Cairn Energy (CNE) 194.20p -1.92%
Euromoney Institutional Investor (ERM) 1,164.00p -1.81%
Intermediate Capital Group (ICP) 887.00p -1.66%