London close: Shares hold ground ahead of Fed call

London stocks had a lethargic Wednesday session, in line with most European bourses, as traders sat on their hands ahead of the Federal Reserve rates announcement later.

In late news, Chancellor Philip Hammond said he will announce his autumn budget on 29 October, with pressure from inside and outside the government for an increase in spending, particularly on health services. There are expected to be changes to housing sector schemes and perhaps a special tax on internet retailers such as Amazon.

Later still, drug developer Indivior issued a profit warnings just before the closing bell. Reinstating full year guidance after it had been withdrawn in the summer due to uncertainty about court challenges from rivals, the company said it expected net income to come in at $230-255m at constant exchange rates and excluding exceptional items, down from the $290-320m guidance given at the start of the year.

The FTSE 100, having spent more than half the session in the red shallows, finished up just four points at 7,511.49, as the pound was rangebound against the dollar at 1.3177 but edged up 0.1% versus the euro at 1.1215.

The dollar index gained strength ahead of the Federal Open Markets Committee's announcement this afternoon, where a 25-basis-point hike to interest rates is expected as the American central bank continues to roll back its easing policies. New forward guidance will also to be issued, including the new ‘dot plot’ diagram on committee members' anticipated rates plans for 2019 and beyond.

"The decision on interest rates is, at this point, a distraction," said Chris Beauchamp, chief market analyst at IG. "What matters is what they say about the economy (again, a hardy perennial) but also whether the committee dares to express a view about any possible trade war impact. Given how the president has already voiced his disapproval of Fed policy, any recognition of negative effects will likely produce a response from the White House, even if it is guardedly expresses."

Overnight, the Dow Jones and S&P 500 finished in the red following a President Trump speech to the United Nations General Assembly, where he made it quite clear that the US “would no longer tolerate abuse” when it comes to trade practices, with his ire directed at China, Iran and oil cartel Opec.

With a rate rise from the FOMC more or less a done deal, Hewson said attention will be less on the fact that this will be the third rate rise this year, than on how the Fed sees the glide path for further policy actions.

"Equities have held up well so far this week, defying (for the moment) the record of the final week in September as the weakest week of the year. A cautious assessment from the Fed could roil equities, with sentiment having moved solidly into the ‘guardedly optimistic’ end of the spectrum," Beauchamp said.

Oil majors BP and Shell, which have supported London's blue chip benchmark this week amid a four-year high in crude oil prices, slipped slightly in early trading as while Brent crude was off its highs, it remained well above $81.

In other corporate news, the AA skidded 10% lower as the roadside assistance group confirmed that profit margins had moved into a lower gear in the first half of the year as investment increased as part of its new strategy. While revenue in the six months to 31 July of £480m was up 2% on a last year, underlying earnings before interest, tax, depreciation and amortisation fell 17% to £161m, though this still kept the group on track to produce trading EBITDA of £335-345m for the full year.

Travel restaurant operator SSP Group fell after saying full-year sales growth expectations remained unchanged after a steady final quarter, driven by increased passenger numbers at airports.

Ocado was lower after credit ratings agency Fitch cut the online grocer's outlook to negative, saying business risk transformation to a technology provider increases execution as its manufacturing capabilities need to scale up over the medium term.

Elementis edged lower as the chemicals group said production at its US Chromium facility in North Carolina had been disrupted as a result of Hurricane Florence, although the impact on 2018 earnings would be “modest”. Flooding had stopped output, but added that the factory had not sustained any significant structural damage.

Outside the FTSE 350, Mitie was lower as it said first-half operating profit would be “flat to slightly down” due to weakness in Social Housing and Cleaning, though this and its full year expectations were in-line with previous guidance.

Bubbling up, PZ Cussons said first-quarter trading was in line with expectations as growth in Europe and Asia offset problems in Nigeria. In a trading update the maker of Imperial leather soap said its performance in the three months to the end of August was supported by new products and tight cost control.

TUI led the Footsie risers, a day ahead of its trading update.

William Hill was little moved as it formed a strategic partnership to offer US lotteries a full service solution for sports betting.

Down on AIM, online fashion retailer Boohoo surged as its upped full year guidance after first-half revenue jumped 50% and adjusted pre-tax profits 43%.

In broker note action, JPMorgan Cazenove cut Kier to 'neutral' from 'overweight' as it saw "multiple possible red flags" over cash performance and debt, but an "optically attractive" valuation and strategic improvement story, while the potential impact of fuel price rises on IAG led to a UBS downgrade to 'neutral'.

Citigroup upgraded chemicals group Croda to 'neutral' from 'sell', Next was bumped up to 'neutral' at Goldman Sachs. RBC Capital Markets hiked Randgold to 'sector perform' and Deutsche Bank lifted STMicroelectronics to 'buy'.

Market Movers

FTSE 100 (UKX) 7,511.49 0.05%
FTSE 250 (MCX) 20,441.43 -0.10%
techMARK (TASX) 3,501.30 0.16%

FTSE 100 - Risers

TUI AG Reg Shs (DI) (TUI) 1,440.00p 3.45%
NMC Health (NMC) 3,480.00p 2.78%
Croda International (CRDA) 5,200.00p 2.48%
easyJet (EZJ) 1,359.50p 1.95%
Kingfisher (KGF) 259.80p 1.88%
Imperial Brands (IMB) 2,681.50p 1.88%
InterContinental Hotels Group (IHG) 4,764.00p 1.47%
Centrica (CNA) 149.25p 1.29%
Shire Plc (SHP) 4,572.50p 1.26%
Carnival (CCL) 4,993.00p 1.18%

FTSE 100 - Fallers

Fresnillo (FRES) 829.60p -3.65%
Melrose Industries (MRO) 207.70p -2.99%
Randgold Resources Ltd. (RRS) 5,314.00p -2.67%
Next (NXT) 5,400.00p -2.14%
BHP Billiton (BLT) 1,661.80p -2.00%
Smurfit Kappa Group (SKG) 3,000.00p -1.96%
Rio Tinto (RIO) 3,886.00p -1.79%
Anglo American (AAL) 1,725.20p -1.57%
Evraz (EVR) 557.20p -1.52%
Antofagasta (ANTO) 862.00p -1.46%

FTSE 250 - Risers

Card Factory (CARD) 193.20p 7.93%
Ferrexpo (FXPO) 202.00p 4.69%
Just Group (JUST) 82.42p 4.26%
Energean Oil & Gas (ENOG) 599.00p 3.10%
Contour Global (GLO) 205.20p 2.50%
Drax Group (DRX) 378.20p 2.44%
PZ Cussons (PZC) 235.00p 2.35%
Sophos Group (SOPH) 502.50p 2.34%
Pantheon International (PIN) 2,148.00p 2.29%
Euromoney Institutional Investor (ERM) 1,346.00p 2.28%

FTSE 250 - Fallers

Indivior (INDV) 215.00p -16.47%
AA (AA.) 103.15p -13.68%
Hochschild Mining (HOC) 158.85p -6.37%
BCA Marketplace (BCA) 200.50p -5.20%
TalkTalk Telecom Group (TALK) 121.30p -5.09%
On The Beach Group (OTB) 488.50p -4.22%
Kier Group (KIE) 989.47p -3.75%
Hunting (HTG) 807.50p -3.70%
Kaz Minerals (KAZ) 546.00p -3.67%
Centamin (DI) (CEY) 105.60p -3.47%