London close: Stocks rise ahead of key Fed decision

The FTSE 100 ended the session up 1.2% at 7,273.41, and the FTSE 250 was 1.42% firmer at 19,315.98.

Sterling was also stronger, last rising 0.49% on the dollar to trade at $1.2056, and gaining 0.79% against the euro to €1.1608.

“Stock markets have rebounded from the brutal losses that were witnessed yesterday as government bond yields have cooled a touch,” said Equiti Capital market analyst David Madden.

“This time 24 hours ago, there was speculation the Federal Reserve might hike rates by 75-basis points this evening, while previously the bank signalled a 50-basis point lift.

“Even though equities are higher, indices such as the FTSE 100 and the S&P 500 are still down considerably on the week.”

Madden noted that although some buyers had entered the fold, the fact the markets were yet to make a full recovery suggested demand was “not overly strong”.

“It is unlikely there will be much activity on the run up to the Fed announcement.

“The minutes from the May meeting showed that most central bankers are keen to hike by 0.5% this evening and in July, but as mentioned above, lately there has been chatter of a 0.75% increase.

“Amid all the whispers about a large rate hike from the Fed, the US 10-year yield hit an 11-year high yesterday, but it has pulled back today, and in turn that has encouraged the equity bulls.”

Grabbing headlines earlier was news that the European Central Bank was holding a rare unscheduled meeting to discuss the turmoil on Europe’s bond markets.

“The Governing Council will have an ad hoc meeting on Wednesday to discuss current market conditions,” the ECB said in its statement, after invitations were reportedly sent out on Tuesday.

It came after sharp moves in bond yields across member nations, after the ECB confirmed last week that it would raise rates this year to tackle inflation.

In response, the spread between the yields of German bonds and those of more indebted countries, such as Italy, surged to its highest in more than two years.

The ECB rarely holds unscheduled meetings, and used the last one to announce its €1.7trn Pandemic Emergency Purchase Programme.

“We don’t expect the ECB to pull out the bazooka today,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.

“The hawks will strongly oppose this, and we quite simply doubt that the council has any grasp of what it wants to do, if anything, let alone the unanimity required to announce a new tool.”

On the data front, the eurozone’s trade deficit widened in April, as industrial output came in below expectations.

According to first estimates from Eurostat, the European Union’s statistics office, the common currency area exported €223.9bn of goods to the rest of the world, an increase of 12.6% year-on-year.

Imports surged 39.4%, to €256.5bn, driven by a further hike in energy imports.

As a result, the trade deficit was €32.4bn, compared to a surplus of €14.9bn in April 2021, while month-on-month, imports jumped 7.1% while exports rose by just 1.5%.

“Industry will be a drag on this quarter, but we will still expect eurozone GDP growth to accelerate a touch thanks to the rebound in services activity,” said Melanie Debono, senior Europe economist at Pantheon.

“April’s rise in industry was broad-based by sector, except for a small fall in capital goods production.

“By country, the data confirmed that industrial output rose in Italy, Spain and Germany but fell in France.”

Across the pond, US retail sales fell unexpectedly last month on the back of a steep decline in auto sales and a drop in furniture sales.

According to the US Department of Commerce, US retail sales volumes slipped at a seasonally-adjusted month-on-month pace of 0.3% to reach $672,874bn.

Economists had anticipated a rise of 0.3%.

Further afield, retail sales in China continued to fall last month, as the effects of Beijing’s strict zero-Covid policy weighed on consumption.

According to the National Bureau of Statistics, retail sales fell 6.7% year-on-year, while month-on-month, sales were broadly flat.

However, that was an improvement on April’s 11.1% slump, when much of Shanghai remained under stringent lockdown conditions.

Analysts had also expected a sharper fall, of around 7.1%.

On London’s equity markets, Premier Inn owner Whitbread jumped 6.27% after it said first-quarter trading beat expectations, as demand continued to rebound following the worst of the pandemic.

B&M European Value Retail was 4.29% higher, following an upgrade to ‘overweight’ at Barclays.

London Stock Exchange Group racked up gains of 5.19% after an upgrade to ‘buy’ at UBS, which said the stock’s current valuation offered "very favourable" risk-reward for one that can grow revenue at about 5% a year.

WH Smith rallied 8.5% after saying it expected annual results to be at the upper end of expectations as it reported a surge in revenue over pre-Covid pandemic levels for the first time, driven by a recovery in the travel market.

Chilean copper miner Antofagasta reversed earlier losses to close up 0.57%, even after it said full-year production would be at the bottom end of guidance following a leak in the concentrate pipeline at the Los Pelambres mine, and subsequent shutdown.

On the downside, Abrdn was knocked 0.24% lower after the artist formerly known as Standard Life Aberdeen was downgraded to 'underperform' at Credit Suisse.

Low-cost carrier Wizz Air descended 3.53%, despite Citi upgrading its recommendation on the airline's shares to ‘neutral’ from ‘sell’, keeping the price target at 2,300p.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,273.41 1.20%
FTSE 250 (MCX) 19,315.98 1.42%
techMARK (TASX) 4,248.18 1.08%

FTSE 100 - Risers

Ocado Group (OCDO) 837.40p 6.73%
Whitbread (WTB) 2,728.00p 6.27%
Scottish Mortgage Inv Trust (SMT) 734.80p 6.22%
Pershing Square Holdings Ltd NPV (PSH) 2,480.00p 5.76%
Coca-Cola HBC AG (CDI) (CCH) 1,765.50p 5.47%
London Stock Exchange Group (LSEG) 7,088.00p 5.19%
Intermediate Capital Group (ICP) 1,467.50p 4.41%
Smurfit Kappa Group (CDI) (SKG) 2,925.00p 4.31%
Kingfisher (KGF) 244.90p 4.30%
B&M European Value Retail S.A. (DI) (BME) 377.80p 4.29%

FTSE 100 - Fallers

Airtel Africa (AAF) 136.70p -3.87%
BP (BP.) 427.40p -1.74%
Shell (SHEL) 2,270.00p -1.60%
BAE Systems (BA.) 763.60p -1.45%
Reckitt Benckiser Group (RKT) 5,962.00p -0.43%
JD Sports Fashion (JD.) 111.35p -0.36%
Abrdn (ABDN) 168.55p -0.24%
Meggitt (MGGT) 770.00p 0.13%
Avast (AVST) 479.60p 0.23%
GSK (GSK) 1,718.60p 0.37%

FTSE 250 - Risers

Trustpilot Group (TRST) 86.05p 8.79%
WH Smith (SMWH) 1,474.00p 8.50%
Playtech (PTEC) 546.00p 7.69%
Ferrexpo (FXPO) 157.10p 5.79%
Cranswick (CWK) 3,086.00p 5.76%
NB Private Equity Partners Ltd. (NBPE) 1,365.00p 5.38%
Dr. Martens (DOCS) 250.00p 5.29%
Caledonia Investments (CLDN) 3,770.00p 5.01%
Urban Logistics Reit (SHED) 172.00p 4.88%
Dunelm Group (DNLM) 811.00p 4.83%

FTSE 250 - Fallers

Wizz Air Holdings (WIZZ) 1,978.50p -3.53%
Sirius Real Estate Ltd. (SRE) 100.00p -2.91%
Babcock International Group (BAB) 349.80p -2.83%
Polymetal International (POLY) 212.00p -2.72%
Rathbone Group (RAT) 2,000.00p -2.44%
Greencoat UK Wind (UKW) 151.00p -2.39%
Petrofac Ltd. (PFC) 132.50p -2.22%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 480.00p -2.14%
Coats Group (COA) 69.40p -2.12%
JPMorgan Japanese Inv Trust (JFJ) 437.00p -1.80%