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FTSE on hold ahead of Federal Reserve's interest rate decision

Published 21/09/2016

The UK's top tier index closed four points higher at 6834.8 points, down from session highs of 6876.3
The UK's top tier index closed four points higher at 6834.8 points, down from session highs of 6876.3

The FTSE 100 pared gains on Wednesday as global stocks took pause ahead of the US Federal Reserve's interest rate decision.

The UK's top tier index closed four points higher at 6834.8 points, down from session highs of 6876.3.

Meanwhile, the pound dipped by 0.1% to 1.297 against the US dollar, as central bank news weighed on currency markets.

Sterling was down 0.15 at 1.163 against the euro.

Global stocks were muted ahead of an interest rate decision from the US Federal Reserve.

Shares rose earlier in the day following news of fresh stimulus measures by the Bank of Japan, which left interest rates on hold - but surprisingly set a target for 10-year bond yields.

The US central bank was widely expected to stand pat on rates, but Connor Campbell, a financial analyst at SpreadEx, said nuances in the Fed's statement would likely move currency markets.

"The greenback could well find itself making headway after the meeting even if the central bank leaves rates unchanged thanks to the potential for a 'hawkish hold', something that would leave a rate hike on the table for some point before the year is out," he said.

Mr Campbell added that markets had priced in a 15% to 22% chance that the central bank would raise rates, " meaning it will come as a real shock if the Fed does pull the trigger".

UK markets were largely unaffected by data which showed that Government borrowing, excluding banks, was slightly higher than analyst forecasts in August - coming in at £10.5 billion versus economist estimates for £10 billion.

The Office for National Statistics (ONS) said public sector net debt rose to £1.6 trillion last month, equivalent to 83.6% of gross domestic product (GDP).

Across Europe, the German Dax rose 0.5% and the French Cac 40 finished higher by 0.5%.

In oil markets, Brent crude prices jumped 1.3% to 46.79 US dollars per barrel after the US Energy Information Administration reported a surprising drop in US crude inventories, and oil services workers in Norway went on strike.

In UK stocks, shares in Royal Bank of Scotland (RBS) were lower by 0.3% or 0.5p at 183p, following reports that Santander walked away from a deal to buy Williams & Glynn - the RBS branches that the bank has to offload in order to appease EU rules on state aid.

RBS is now expected to fetch less than the £1.9 billion it wants for the business.

Away from the top tier index, Bonmarche shares plummeted over 20% or 25p to 90p, after issuing a profit warning, saying "unseasonably hot weather" in September was hurting sales of its autumn ranges.

The retailer said it expects like-for-like sales at its shops to plunge by 8% in the second quarter and first half of the year, resulting in full year pre-tax profit of between £5 million to £7 million.

Majestic Wine shares also took a drubbing off the back of a profit warning, with shares falling over 23% or 103.5p to 330p

The company said was suffering from an ill-fated and costly marketing campaign for its Naked Wines business in America and tough trading in its commercial arm.

The biggest risers on the FTSE 100 were Legal and General up 7.9p at 222.6p, Anglo American up 31.1p at 888.7p, Kingfisher up 11.9p at 380.7p, and Barclays up 5.15p at 171.6p.

The biggest losers on the FTSE 100 were Ashtead Group down 34p to 1182p, Tui AG down 26p to 1049p, Hikma Pharmaceuticals down 46p to 2113p and BAE Systems down 11p at 533.5p.

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