London close: Stocks maintain gains ahead of Fed decision

London's stock market rebounded on Wednesday, having incurred heavy losses in the previous session.

The FTSE 100 finished up 0.2% at 7,788.37, and the FTSE 250 was ahead 0.27% to end the day at 19,365.60.

Investors were keeping an eye on the US Federal Reserve's latest policy announcement later in the day, which was expected to result in a 25-basis point increase to the central bank’s interest rate target.

On the currency front, sterling gained ground against both the dollar and the euro, last rising 0.64% to trade at $1.2547, and advancing 0.17% to change hands at €1.1354.

“Tonight is expected to see the final rate hike of the current cycle before the Fed moves into its pause period,” said IG chief market analyst Chris Beauchamp.

“This is the base case, and if we see a more hawkish FOMC tonight then the tentative gains in stocks this afternoon could slip away.

“Powell’s Fed days have a poor record for stocks, with the S&P 500 falling on average once the meeting is over, so we could be in for a choppy night.”

Unemployment falls in eurozone, US services sector expands

In economic news, unemployment in the eurozone fell by 0.1 percentage points month-on-month to 6.5% in March, according to data released earlier by Eurostat.

The figure represented the lowest rate since April 1998, when Eurostat started compiling jobless data.

Unemployment in the wider European Union, meanwhile, remained steady at 6.0%.

“There are now 11 million people out of work in the eurozone - 1.1 million less people than before the pandemic,” said Melanie Debono, senior Europe economist at Pantheon Macroeconomics.

“Much of this is owed to the success of the short time work schemes but is also a reflection of resilience in the face of the current slowdown.”

Looking ahead, Debono said survey data was suggesting labour demand was picking up pace.

“We doubt this will be enough to push the unemployment rate much lower, as firms face still-high input costs, including wage demands, and higher interest rates.

“We look for the unemployment rate to hold steady, at best, and think it is more likely to rise over the coming months.”

Across the pond, the US services sector experienced a slight uptick in activity in April, with the Institute for Supply Management's services sector purchasing managers' index (PMI) improving to 51.0 in April, from 51.2 in March.

The increase was driven by rising new orders and prices paid, although the figure fell short of the forecast reading of 52.0.

Finally, private sector employment in the US exceeded expectations in April, with ADP data showing a rise of 296,000 jobs from March.

Analysts had forecast a jump of 148,000 jobs, while the report also revealed that annual pay was up 6.7% year-over-year.

Small businesses with fewer than 50 employees added 121,000 jobs, while medium businesses with between 50 and 499 employees added 122,000 jobs.

Large businesses with more than 500 employees added 47,000 jobs.

“The slowdown in pay growth gives the clearest signal of what's going on in the labour market right now,” said Nela Richardson, chief economist at ADP.

“Employers are hiring aggressively while holding pay gains in check as workers come off the sidelines.

“Our data also shows fewer people are switching jobs.”

Pearson rebounds, Lloyds Bank slips despite profit beat

On London’s equity markets, education publisher Pearson rocketed 10.08%, having tumbled on Tuesday when US peer Chegg warned about the impact of artificial intelligence (AI) on its homework-help services.

Coca-Cola HBC gained 2.06% after reporting a strong first quarter, with organic revenue growth of 22.2%, excluding Russia and Ukraine, led by price-mix.

TI Fluid Systems surged 14.63% after it reported a 15.2% jump in first-quarter revenues, and indicated that it was outperforming markets in all regions.

On the downside, Lloyds Banking Group slid 3.57% despite beating quarterly profit forecasts.

The bank posted a pre-tax profit of £2.26bn, up 46%, but reported that deposits had fallen sharply, by £2.2bn to £473.1bn, including a reduction in retail current account balances of £3.5bn.

Consumer health giant Haleon lost 3.32% after announcing that first-quarter profits had come in below expectations amid higher costs.

RS Group fell 2.2% after chief financial officer David Egan left the business with immediate effect, having admitted to a relationship with a colleague.

Barratt Developments slipped 1.52% despite hinting at a recovery in the housing market and reporting increased sales rates.

“A muted share price reaction on its latest update should be seen in the context of strong gains last month on a read-across from other housebuilders’ cautious optimism and a recent positive shift in UK property prices,” said AJ Bell investment director Russ Mould.

Meanwhile, Aston Martin Lagonda was down by 3.67% despite posting a narrowing of its first-quarter losses and strong growth in deliveries of its sport utility vehicle DBX.

Finally, Watches of Switzerland Group dropped by 1.17% after announcing the departure of its finance chief Bill Floydd, by mutual agreement.

Reporting by Josh White for Sharecast.com.

FTSE 100 +15.34 (+0.20%) 7,788.37

RISERS
Vodafone Group +2.64% 96.16p
Melrose Industries +2.56% 420.50p
Burberry Group +2.52% 2,607.0p
Scottish Mortgage +2.22% 625.80p
Carnival +2.08% 686.4p
Coca-Cola HBC +2.06% 2,483.0p
Fresnillo +1.91% 714p
Anglo American +1.79% 2,413.0p
Spirax-Sarco Engineering +1.7% 11,360.0p
Legal & General +1.67% 231.6p

FALLERS
Lloyds Banking Group -3.56% 45.98p
Croda International -2.94% 6,734.0p
IAG -2.01% 149.00p
Ocado -1.59% 487.30p
Associated British Foods -1.56% 1,925.5p
Barratt Developments -1.5% 497.60p
Smith & Nephew -1.5% 1,278.50p
Taylor Wimpey -1.40% 126.45p
Next -1.33% 6,514.0p
Schroders -1.25% 472.0p

FTSE 250 +51.37 (+0.27%) 19,365.60

RISERS
TI Fluid Systems +14.63% 123.80p
Centamin +6.11% 109.40p
Hochschild +4.93% 75.50p
The Renewables Infrastructure Group +3.34% 130.00p
IntegraFin +3.13% 283.60p
ICG Enterprise +3.06% 1,076.00p
Pantheon +2.80% 257.0p|
Greencoat +2.56% 160.50p
TP ICAP +2.42% 169.30p
Petrofac +2.40% 74.80p

FALLERS
Cineworld -14.96% 0.94p
Card Factory -5.58% 105.00p
Restaurant Group -4.97% 44.00p
Aston Martin Lagonda -3.67% 215.00p
International Distributions Services -2.94% 244.30p
RS Group -2.80% 887.40p
Capita -2.75% 32.50p
888 Holdings -2.73% 80.10p
Crest Nicholson -2.26% 259.20p
Redrow -2.18% 515.00p