FTSE falls as markets wobble ahead of US rates decision

The London Stock Exchange swung into the red on Wednesday as investors nervously await interest rate decisions from central banks in the US and the UK.

The FTSE 100 moved 56.18 points lower, or 0.68%, to end the day at 8,253.68.

Official data on Wednesday morning showed that Consumer Prices Index (CPI) inflation remained unchanged at 2.2% in August, slightly above the 2% target for the second month in a row.

The reading comes a day before the Bank of England will set interest rates, which currently sit at 5%.

Most economists are expecting the Bank to keep rates unchanged, but said another 0.25 percentage point reduction cannot be ruled out.

The US Federal Reserve will announce interest rates for the nation on Wednesday evening, with financial markets widely expecting it to implement its first cut since 2020.

Danni Hewson, head of financial analysis at AJ Bell, said: “Yesterday’s rate cut optimism has been replaced with nervousness as investors wait for the Fed to deliver its first downward move since the start of the Covid pandemic.

“It’s not a question of whether there will be a cut but of how deep the first cut will be, and with just hours to go expectation is still pretty divided.

“There will be investors who’ve made the wrong bet and that’s likely to result in a bit of post-action volatility.”

Over in New York, trading started on the back foot with the S&P 500 down about 0.2% and Dow Jones down 0.1% by the time European markets closed.

In Paris, the Cac 40 closed 0.57% lower and in Frankfurt, the Dax dipped 0.03%.

The pound was up about 0.25% against the US dollar at 1.3195, and up 0.3% against the euro at 1.1875.

The price of Brent crude oil was down 0.65% to 73.20 US dollars per barrel.

In company news, shares in PZ Cussons dropped after the Imperial Leather maker said it swung to a loss over the year to May.

The business has been affected by last year’s 70% devaluation of the Nigerian naira, which it said it has been trying hard to mitigate while still serving Nigerian customers.

Shares in PZ Cussons closed 15.2% lower as investors reacted to the financial update.

Elsewhere, Legal & General said it had agreed to sell its housebuilding subsidiary Cala back to its former owner in a £1.35 billion deal.

L&G said it could use some of the proceeds to return cash to shareholders via share buybacks. Nevertheless, the news was not enough to shore up excitement among investors and its share price closed 2.9% lower.

The biggest risers on the FTSE 100 were Reckitt, up 57p to 4,667p, Rightmove, up 8p to 681.2p, Kingfisher, up 3.7p to 326.6p, Centrica, up 1.2p to 118.15p, and WPP, up 7p to 757p.

The biggest fallers on the FTSE 100 were JD Sports, down 9.5p to 150.2p, Rentokil, down 17.5p to 364p, Diploma, down 134p to 4,498p, Legal & General, down 6.5p to 221.9p, and Halma, down 62p to 2,578p.