Wall Street higher ahead of Fed minutes as FTSE struggles
The FTSE 100 and European stocks were lower this Wednesday as investors awaited minutes from the Federal Reserve's policy meeting for fresh clues on the trajectory of interest rates.
The FTSE 100 (^FTSE) fell 0.71% to 7,921 points during afternoon trading, while the CAC 40 (^FCHI) in Paris lost 0.26% to 7,289 points. In Germany, the DAX (^GDAXI) slipped 0.19% to 15,370.
Across the pond, US stocks rose modestly early on Wednesday following a broad-based sell-off to start the short week as investors await a readout of the Federal Reserve's latest meeting minutes due out later today.
The Dow Jones (^DJI) rose 0.17% to 33,184 points. The S&P 500 (^GSPC) gained 0.21% to 4,005 points and the tech-heavy NASDAQ (^IXIC) climbed 0.48% to 11,547.
"Investors are waking up to the realization that fresh interest rate hikes will be needed in the US — perhaps as many as three in quick succession — to tame the price spiral and that’s set to send consumers more cautious," Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.
“Wave of exuberance, which have propelled equities higher since the start of the year, have turned into tides of disappointment and apprehension about the difficulties that still may lie ahead for the mighty US economy.
“High hopes that the Federal Reserve could cut rates by the end of the year have been dashed, replaced by worries that up to three hikes in quick succession may be needed to tame the price spiral."
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Minutes from the Federal Open Market Committee's (FOMC) meeting on 31 January to 1 Feb will offer insight into the thinking behind officials' 25-basis-point interest rate increase earlier in the month.
"While the stock market has staged an impressive rebound so far this year, markets are still trying to adjust to the reality that the Federal Reserve is unlikely to pivot and is instead still focused on fighting inflation, which suggests that investors should be prepared for interest rates to stay higher for longer," Carol Schleif, chief investment officer of BMO Family Office said.
Back in London, miners were leading losses across the index, with Anglo American (AAL.L) falling 2.93%, Endeavour Mining (EDV.L) down 2.53% and Rio Tinto (RIO.L) retreating 3.27%.
Rio Tinto reported a 38% drop in profits for last year and more than halved its dividend.
Victoria Scholar, head of investment at Interactive Investor, said: "Shares in Rio Tinto have rallied by more than a third since the start of November but have retreated from the January highs with earnings putting further pressure on the stock today. Other stocks in the sector like Endeavour Mining, Anglo American, Glencore (GLEN.L) and Antofagasta (ANTO.L) are also taking a hit in Wednesday’s trade.”
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Lloyds (LLOY.L) recovered earlier loses and was muted after it revealed annual profits were flat at £6.93bn ($8.35bn) even as it announced a £2bn share buyback alongside an increased total dividend of 2.40p, up from 2.0p in 2021.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “Profits have been flat year-on-year, with bad loan provisions adding extra costs, among other moving parts.
“The bank has a history of prioritising its dividend, which is up 20% on last year, and acts as a good indicator of sentiment from management.
“Alongside the dividend increase is a £2bn share buyback programme, underpinned by enhanced guidance for the years ahead — all of which suggests a relatively positive outlook for Lloyds.
“The bigger question, though, is what Lloyds will do with its existing portfolio of businesses — while there are no answers on that front today, updates will likely be a feature of future statements.”
Meanwhile, Brent crude (BZ=F) slipped and was trading at around $82 per barrel amid growing concerns of lower global economic growth and demand for fuel.
In Asia, Tokyo’s Nikkei 225 (^N225) lost 1.34% to 27,104 points and the Hang Seng (^HSI) in Hong Kong fell 0.36% to 20,454. The Shanghai Composite (000001.SS) also lost ground, retreating 0.47% to 3,291 points.
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