London close: Stocks rally ahead of Fed's interest rate decision

The FTSE ended up 72.53 points to 6,437.80.

The Fed releases its policy decision at 1800 GMT and is expected to keep rates at 0.25% amid low inflation and concerns about the risks arising from a slowdown in emerging markets. While no surprises are expected, the press release will be looked at closely for any hints on when the first rate hike in nearly a decade will happen.

"After the September FOMC meeting the market consensus was surprised by the dovish tone of the Fed," said analysts at Rabobank.

"However, rather than been reassured by the expectation of low rates for longer, risky assets lost their footing as the market absorbed a less appealing outlook for both US and global growth.

"Although risky assets subsequently found comfort in the release of the weak September payrolls release, there remains a lot of uncertainty as to what cues investors will take from today’s policy statements from the FOMC."

In economic data, the US trade gap in goods narrowed more than expected in September to reach a seven-month low. According to official government data, the trade gap in goods, excluding services, declined 13% month-on-month to $58.6bn compared with analyst expectations for a $64.3bn figure.

Meanwhile, a report from the Mortgage Bankers’ Association showed mortgage applications fell 3.5% in the week to 23 October after a 11.8% rise the previous week.

Investors are now looking ahead to Thursday’s US gross domestic product report which is expected to show an annualised 1.5% increase in the third quarter, slowing down considerably from the previous quarter’s 3.9% growth.

In the Eurozone, GfK’s forward-looking consumer confidence index fell to 9.4 in November from 9.6, as expected by analysts. GfK said the economic expectations are “decreasing significantly, seemingly as a result of the feelings created by the ongoing refugee crisis in particular”.

On the corporate front, GlaxoSmithKline jumped after its third-quarter revenue and core earnings per share beat market expectations.

BT gained on news its £12.5bn acquisition of the EE mobile network has been provisionally approved by UK competition officials unconditionally and without remedies.

British American Tobacco rallied after reporting a better-than-estimated fall in sales for the first nine months of the year.

Lloyds Banking Group declined after reporting a decline in third quarter underlying profit as it was hit by a further charge for insurance mis-selling.

Meggitt plunged as the aerospace and industrial components supplier warned that full year profits will be well below forecasts after it endured softer trading during the third quarter, with a "marked deterioration" in September in energy markets.

Chilean copper producer Antofagasta edged lower after cutting its annual production target for the third time this year as it reported fairly stable output for the third quarter compared with the second.

Supermarket retailer Wm Morrison was under the cosh after Bank of America Merill Lynch cut its stance on the stock to ‘neutral’ from ‘buy’.