London close: Stocks rise ahead of Fed's policy announcement

London stocks finished in the green on Wednesday as traders digested the Bank of Japan’s policy decision and looked ahead to the Federal Reserve’s interest rate announcement.

Japan's central bank maintained its negative interest rate of -0.1% and its quantitative easing programme at 80trn yen a year but said it would aim to keep yields on 10-year government bonds around current levels of 0%. The BoJ's decision not to push interest rates further into negative territory gave banking shares a lift in morning trade, including Asia-focused lenders HSBC and Standard Chartered.

“We expect volatility in Japanese government bonds to decline significantly, while it remains very uncertain how the new framework will affect the 0-10 year segment of the Japanese government bond yield curve,” said Danske Bank.

Investors are now awaiting the Federal Reserve’s policy decision at 1900 BST. Since the US central Bank is widely expected to keep interest rates unchanged, analysts are more interested in the tone of the policy statement for hints on the timing on the next rate hike.

David Morrison, senior market strategist at SpreadCo, said: “There’s very little likelihood that the central bank will tighten monetary policy. Not only has recent US economic data been patchy of late, but the Fed has done nothing to prepare the markets for a rate hike.

“If it announced an increase in its fed funds rate then we can expect market turmoil. While the Fed knows it has to push rates up from current levels, it won’t risk cratering the bond and equity markets with a shock move ahead of the Presidential Election.”

Closer to home, a Bank of England survey showed economic growth in Britain has slowed in the three months since the UK voted to leave the European Union on 23 June. The report added that business investment and employment are likely to be flat over the coming year.

Meanwhile, UK public sector borrowing fell less than expected in August, official data showed. The Office for National Statistics said public sector borrowing, excluding public sector banks, dropped by £0.9bn to £10.5bn in August compared to the same month a year ago. Analysts had pencilled in £10.2bn.

Elsewhere, oil prices climbed after two separate reports showed a surprise drop in US crude inventories last week.

The Energy Information Agency said US commercial crude oil inventories decreased by 6.2 million barrels last week to 504.6m barrels. Analysts had predicted an increase of 3.4 million barrels.

Overnight, the American Petroleum Institute revealed a 7.5m barrel fall in US crude inventories to 507.2m barrels last week, compared to an estimated increase of 2.8m barrels.

Brent crude jumped 1.7% to $46.69 per barrel and West Texas Intermediate advanced 2.2% to $45.08 per barrel at 1623 BST.

On the company front, Anglo American rallied after Barclays upgraded the stock to ‘equal-weight’ from ‘underweight’ and lifted the price target to 845p from 550p on strong valuation support and solid earnings momentum.

Kaz Minerals was also lifted by Barclays raising its rating to 'equal-weight’ from ‘underweight’ and increasing the target price to 210p from 130p.

Barclays itself got a boost as HSBC upgraded the stock to ‘buy’ from ‘hold’ and lifted the price target to 190p from 150p saying the pending disposal of Barclays Africa will be positive for sentiment.

Imperial Brands slumped after Credit Suisse downgraded its recommendation to 'neutral' from ‘outperform’ and lowered the price target from 4,250p to 4,000p, citing strained consumer finances and the prospect of stiffer competition.

TUI tanked on reports the tour operator has chosen advisors to launch the sale of a portfolio of specialist travel brands in a deal potentially worth up to €600m as it looks to sell its non-core assets.

Ocado Group was on the back foot after Deutsche Bank downgraded its rating to ‘sell’ from ‘hold’ and reiterated a target price of 220p, citing the supermarket’s cautious outlook on margins in a trading update issued last week.

Market Movers

FTSE 100 (UKX) 6,834.77 0.06%
FTSE 250 (MCX) 17,939.72 0.22%
techMARK (TASX) 3,520.02 -0.38%

FTSE 100 - Risers

Legal & General Group (LGEN) 222.90p 3.82%
Anglo American (AAL) 890.30p 3.81%
Kingfisher (KGF) 380.70p 3.23%
Barclays (BARC) 171.60p 3.09%
Aviva (AV.) 449.50p 2.77%
Fresnillo (FRES) 1,713.00p 2.57%
Sainsbury (J) (SBRY) 249.90p 2.21%
Standard Life (SL.) 355.80p 2.18%
Rio Tinto (RIO) 2,411.00p 2.16%
BHP Billiton (BLT) 1,053.50p 2.03%

FTSE 100 - Fallers

Ashtead Group (AHT) 1,185.00p -2.55%
TUI AG Reg Shs (DI) (TUI) 1,049.00p -2.42%
Hikma Pharmaceuticals (HIK) 2,113.00p -2.13%
BAE Systems (BA.) 534.00p -1.93%
Imperial Brands (IMB) 3,934.00p -1.82%
Reckitt Benckiser Group (RB.) 7,142.00p -1.49%
Mediclinic International (MDC) 926.50p -1.49%
Merlin Entertainments (MERL) 473.00p -1.46%
National Grid (NG.) 1,057.50p -1.40%
Whitbread (WTB) 4,011.00p -1.38%

FTSE 250 - Risers

AO World (AO.) 165.80p 5.27%
Hunting (HTG) 438.00p 4.83%
Evraz (EVR) 154.60p 4.32%
Hochschild Mining (HOC) 269.00p 3.70%
Kaz Minerals (KAZ) 208.70p 3.57%
RPC Group (RPC) 938.50p 3.25%
Galliford Try (GFRD) 1,315.00p 2.98%
Paragon Group Of Companies (PAG) 324.10p 2.95%
Allied Minds (ALM) 327.10p 2.83%
Ibstock (IBST) 165.10p 2.80%

FTSE 250 - Fallers

Ocado Group (OCDO) 254.50p -5.32%
Daejan Holdings (DJAN) 5,690.00p -3.48%
Pets at Home Group (PETS) 234.00p -3.35%
Mitie Group (MTO) 187.40p -2.90%
Thomas Cook Group (TCG) 72.35p -2.89%
Indivior (INDV) 323.60p -2.88%
FirstGroup (FGP) 106.80p -2.47%
Domino's Pizza Group (DOM) 356.30p -2.33%
Ascential (ASCL) 273.20p -2.08%
Caledonia Investments (CLDN) 2,468.00p -2.06%