London close: Stocks finish weaker ahead of Fed announcement

London’s benchmark closed weaker on Wednesday, after the OECD warned the UK is likely to take the worst hit from the coronavirus pandemic among developed nations, and as investors awaited the latest policy announcement from the Federal Reserve.

The FTSE 100 ended the session down 0.1% at 6,329.13, and the FTSE 250 was off 0.84% at 17,605.46.

Sterling was stronger against both of its major trading pairs, last rising 0.28% against the dollar to $1.2764, and advancing 0.22% on the euro to €1.1247.

Stocks turned lower after the Organisation for Economic Cooperation and Development said the pandemic has caused the deepest global recession in a century, with the UK set to feel the biggest impact.

It also said Britain should consider an extension of its trade terms with the EU beyond the Brexit transition deadline of December 2020 to reduce uncertainty given the economic disruption caused by Covid-19.

The UK economy was already stagnating due to drawn out negotiations over its future relationship with the bloc after voting to leave in a 2016 referendum.

As restrictions began to ease, the path to global economic recovery remained "highly uncertain and vulnerable to a second wave of infections", the OECD warned in a set of gloomy forecasts.

Britain was set for a 11.5% slump in national income in 2020, compared with a fall of 6.6% in Germany, 11.1% in Spain, 11.3% in Italy and France’s 11.4%.

Investors were also jittery ahead of the Fed’s rate announcement at 1900 BST.

Danske Bank said it does not expect the Fed to make any significant changes to its policy stance despite the very positive jobs report surprise on Friday, although markets have priced out negative rates.

"However, we are looking for two things: whether the Fed changes its forward guidance and whether it puts a number on its monthly QE buying,” Danske said.

“We think it is too early for the Fed to change its forward guidance at this point just because of one economic data release although we cannot completely rule out the Fed will make it more clear what the conditions for rate hikes are,” they added, referring to the possibility of an announcement of a temporary asymmetric operational inflation targeting, as it discussed in January and February, or a revival of the old Evans rule, linking rates to unemployment.

“We think the Fed is satisfied with its unlimited, open-ended and flexible quantitative easing programme, and does not think it will gain much by announcing a monthly purchasing target.

“We do not expect the Fed to implement yield curve control.”

In equity markets, travel stocks were under the cosh again, with British Airways parent IAG down 7.36%, budget airline easyJet off 4.19%, InterContinental Hotels 2.94% lower, and cruise operator Carnival 8.96% weaker, while travel company TUI was down 7.17%.

Elsewhere, Shaftesbury reversed earlier gains to close down 5.09%, after warning that at least half its rent could go uncollected in the second half as the London West End property company reported a near-8% drop in the value of its portfolio.

On the upside, Lancashire Holdings rallied 8.75% after saying it has raised around £277m in a placing to take advantage of rate rise across the majority of its business lines.

The company placed just under 39.6 million new common shares at 700p each, which is a 3.6% discount to the closing share price on Tuesday.

Beazley was also trading higher, closing out the session up 4.01%.

Market Movers

FTSE 100 (UKX) 6,329.13 -0.10%
FTSE 250 (MCX) 17,605.46 -0.84%
techMARK (TASX) 3,792.38 0.00%

FTSE 100 - Risers

British American Tobacco (BATS) 3,124.00p 3.24%
Rentokil Initial (RTO) 488.20p 3.13%
Hikma Pharmaceuticals (HIK) 2,353.00p 3.02%
Hargreaves Lansdown (HL.) 1,691.00p 3.02%
London Stock Exchange Group (LSE) 8,062.00p 2.91%
Polymetal International (POLY) 1,504.00p 2.77%
Intertek Group (ITRK) 5,464.00p 2.36%
Imperial Brands (IMB) 1,542.50p 2.06%
Admiral Group (ADM) 2,305.00p 1.94%
AstraZeneca (AZN) 8,404.00p 1.94%

FTSE 100 - Fallers

Just Eat Takeaway.Com N.V. (CDI) (JET) 7,626.00p -13.08%
Carnival (CCL) 1,354.50p -9.79%
International Consolidated Airlines Group SA (CDI) (IAG) 288.30p -7.36%
Melrose Industries (MRO) 123.80p -7.27%
M&G (MNG) 157.75p -7.23%
Whitbread (WTB) 2,501.00p -5.73%
Meggitt (MGGT) 310.90p -5.50%
Land Securities Group (LAND) 626.20p -4.57%
British Land Company (BLND) 418.00p -4.54%
Rolls-Royce Holdings (RR.) 352.50p -4.51%

FTSE 250 - Risers

Lancashire Holdings Limited (LRE) 789.50p 8.75%
Helios Towers (HTWS) 204.50p 7.89%
Oxford Instruments (OXIG) 1,388.00p 6.77%
Plus500 Ltd (DI) (PLUS) 1,162.50p 5.01%
Beazley (BEZ) 435.40p 4.01%
Petropavlovsk (POG) 27.30p 3.61%
Kaz Minerals (KAZ) 463.10p 3.56%
Ferrexpo (FXPO) 197.10p 3.14%
Centamin (DI) (CEY) 155.90p 3.11%
Avast (AVST) 475.00p 3.08%

FTSE 250 - Fallers

Just Eat Takeaway.Com N.V. (CDI) (JET) 7,626.00p -13.08%
TUI AG Reg Shs (DI) (TUI) 486.30p -7.69%
PPHE Hotel Group Ltd (PPH) 1,150.00p -7.63%
Capita (CPI) 44.03p -7.01%
Petrofac Ltd. (PFC) 213.10p -6.94%
Marks & Spencer Group (MKS) 112.15p -6.93%
Wood Group (John) (WG.) 218.60p -6.86%
Cineworld Group (CINE) 87.70p -6.70%
SSP Group (SSPG) 293.20p -6.62%
Ascential (ASCL) 278.60p -6.45%