London close: Stocks end lower ahead of US election, central bank decisions

UK stocks dropped on Wednesday amid nervousness ahead of the US elections and interest rate decisions by the Federal Reserve and the Bank of England.

The FTSE 100 closed down 1.04% to 6,845.42 points.

Investor sentiment took a hit after a poll released late on Tuesday by ABC News/Washington Post showed Republican nominee Donald Trump taking a one-point lead over Hillary Clinton.

The added support for Trump comes in the wake of last Friday’s news that the FBI is taking another look into the emails of Democratic presidential candidate Hillary Clinton.

“The sudden change in fortunes set in train on Friday has seen investors run for cover amid a realisation that Trump might actually win,” said Joshua Mahony, market analyst at IG.

“Historically, the economic path of the US economy has changed little in election years, yet it is the uncertainty that it would create which has many worried.”

Meanwhile, the Federal Reserve is set to announce its latest policy decision at 1800 GMT. With the proximity of the elections next week, economists expect the central bank will keep interest rates unchanged.

Investors will be scrutinising the Fed’s policy statement for clues on whether a widely-expected rate hike in December is likely following signs the US economy is improving.

“However, with the election outcome once again so uncertain, I wonder whether they’ll opt against any reference to the next meeting and simply reiterate the improved economic conditions,” said Oanda’s Craig Erlam.

“The latter could be taken by the markets that they are overpricing a hike, particularly in the event of a Trump victory.”

The US also saw the release of the private payrolls report from ADP. Employers added 147,000 jobs in October, missing expectations for a 165,000 increase. Meanwhile, the September figure was revised up to show 202,000 jobs were added, compared to a previous estimate of 154,000.

Capital Economics said: "In isolation, the weaker than expected ADP figure suggests there is some downside risk to our forecast of a 190,000 increase in non-farm payroll employment, due out this Friday. But given the latest evidence of an improvement in the activity surveys, particularly the employment index in the ISM manufacturing index, we’re happy to stick with our existing estimate."

Closer to home, the seasonally adjusted Markit/CIPS UK construction purchasing managers’ index edged up to 52.6 in October from 52.3 the month before. A reading above 50 signals an expansion.

Nationwide revealed UK house prices rose 4.6% in October from a year ago to an average of £205,904, slowing from 5.3% growth in September. Compared to a month ago, prices in October were flat following a 0.3% month-on-month rise in September.

Looking ahead, the Bank of England announces its policy decision on Thursday along with its meeting minutes and inflation report. Economists expect no change to interest rates so will be more interested in the policy meeting minutes and inflation report for clues on the next course of action.

Meanwhile, oil prices were under the cosh after data from the Energy information Administration revealed crude inventories rose by 14.4 million barrels in the week ended 28 October, more than the 1.0 million build in barrels expected.

Brent crude plunged 3.03% to $46.72 per barrel and West Texas Intermediate declined 3.07% to $45.27 per barrel at 1627 BST.

In corporate news, retailer Next pushed higher after it trimmed its full-year sales guidance following a drop of almost 6% in third-quarter retail sales but said profits would come in as expected thanks to cutting its cloth more severely.

Housebuilder Persimmon advanced after it said trading in the third quarter following the Brexit vote was “encouraging” but remained cautious about new land investment due to the economic uncertainty brought about by the referendum.

EasyJet jumped after HSBC upgraded its rating on the stock to ‘buy’ from ‘reduce’ and lifted the target price to 1,150p from 800p.

Asia-focused Standard Chartered was under the cosh for the second day running after its third-quarter results on Tuesday missed expectations.

G4S surged as it said revenue in the nine months to the end of September rose 5.7% from the same period last year.

OneSavings Bank declined despite posting a 13% rise in its nine-month underlying loan book. Traders attributed the move to profit-taking following a strong share price performance in the run-up to the results.

Pharmaceutical company Indivior rallied as it increased its full year revenue guidance to reflect faster growth in the USA and also recorded a $220m charge relating to antitrust litigation currently going through the courts.

Market Movers

FTSE 100 (UKX) 6,845.42 -1.04%
FTSE 250 (MCX) 17,463.46 -0.34%
techMARK (TASX) 3,319.10 -0.39%

FTSE 100 - Risers

Fresnillo (FRES) 1,780.00p 3.61%
Next (NXT) 4,979.00p 3.51%
easyJet (EZJ) 968.00p 2.92%
Randgold Resources Ltd. (RRS) 7,585.00p 2.57%
Associated British Foods (ABF) 2,525.00p 2.02%
Hammerson (HMSO) 556.00p 1.46%
Polymetal International (POLY) 952.00p 1.17%
Smiths Group (SMIN) 1,416.00p 1.07%
Travis Perkins (TPK) 1,380.00p 0.95%
Persimmon (PSN) 1,751.00p 0.81%

FTSE 100 - Fallers

Standard Chartered (STAN) 644.10p -4.34%
Royal Dutch Shell 'A' (RDSA) 2,054.50p -2.86%
Royal Dutch Shell 'B' (RDSB) 2,136.50p -2.84%
Barclays (BARC) 182.05p -2.49%
St James's Place (STJ) 924.00p -2.33%
Experian (EXPN) 1,530.00p -2.17%
Shire Plc (SHP) 4,431.50p -2.12%
National Grid (NG.) 1,028.00p -2.10%
Royal Bank of Scotland Group (RBS) 182.70p -2.09%
Aviva (AV.) 430.20p -1.98%

FTSE 250 - Risers

Indivior (INDV) 350.40p 10.64%
G4S (GFS) 242.80p 10.31%
Smurfit Kappa Group (SKG) 1,873.00p 6.36%
Sports Direct International (SPD) 292.80p 5.97%
CLS Holdings (CLI) 1,575.00p 4.17%
Cranswick (CWK) 2,203.00p 3.43%
Allied Minds (ALM) 344.20p 3.18%
Acacia Mining (ACA) 551.00p 2.61%
NCC Group (NCC) 197.50p 2.58%
JRP Group (JRP) 123.00p 2.33%

FTSE 250 - Fallers

Tullow Oil (TLW) 251.00p -5.28%
OneSavings Bank (OSB) 278.00p -4.70%
Hunting (HTG) 469.30p -4.34%
Shawbrook Group (SHAW) 211.30p -4.26%
Amec Foster Wheeler (AMFW) 420.00p -4.00%
Henderson Group (HGG) 221.30p -3.74%
Weir Group (WEIR) 1,604.00p -3.37%
Aberdeen Asset Management (ADN) 306.00p -3.20%
Polar Capital Technology Trust (PCT) 772.00p -3.14%
Phoenix Group Holdings (DI) (PHNX) 701.50p -3.03%