London midday: Stocks bounce as Fed countdown begins

Investors were hedging their bets ahead of the start of a two-day policy meeting from the US Federal Reserve, with some observers expecting the post-meeting statement to be tweaked should Chair Janet Yellen be intending to start a cycle of policy tightening come September.

As of 12:01 the FTSE 100 was higher by 0.8% to the 6,557.36 mark, alongside a similar bounce in the main European equity benchmarks.

Bill Hubard, chief economist at Bankor pointed out how in previous meetings the Fed had, in his understanding, indicated it did not want markets to become too complacent by flagging up possible moves in rates too far in advance, especially so the first hike.

The minutes of the April FOMC showed that “most participants” decided that “the timing of the first increase in the target range for the federal funds rate would appropriately be determined on a meeting-by-meeting basis and would depend on the evolution of economic conditions and the outlook”, Hubard explained.

Acting as a backdrop, the Shanghai Stock Exchange’s Composite Index closed 1.68% lower on Tuesday at 3,663.002 after hitting an intra-day minimum below the 3,550 point mark. That followed an 8.5% drop in Chinese stocks on Monday, partly as a result of reports that policymakers might already be dialling back their policy support for stockmarkets.

Indeed, that volatility in Chinese stocks and the still unsettled situation in Greece led to a pick-up in market chatter regarding the likelihood that the Fed would postpone any rate increase until after September.

Analysts at Rabobank warned of the effects which a potentially explosive cocktail of worries around China, Greece and interest rate rises Stateside might have.

“If the Fed wants to continue to take the ‘glass half full’ view, a negative reaction from emerging markets can be expected to continue, especially with the Chinese engine clearly sputtering: that is a major concern in our increasingly-integrated global economy,” the Dutch bank's analysts said in a research note e-mailed to clients.

The pace of growth in Britain’s economy picked up in the second quarter to a 0.7% quarter-on-quarter clip, as expected by most analysts, following a rise of 0.4% in the first three months of the year, according to the Office for National Statistics.

Nonetheless, economists Fabrice Montagne and Andrzej Szczepaniak at Barclays were sceptical, telling clients they would “not recommend drawing excessively strong conclusions from today’s release.”

Not only were the data prone to large revisions, one needed to factor in recent slowing in the labour market, more constrained household finances and greater uncertainty for companies ahead of the EU-referendum too.

Market Movers
techMARK 3,143.44 +0.20%
FTSE 100 6,557.36 +0.80%
FTSE 250 17,391.85 +0.72%

FTSE 100 - Risers
RSA Insurance Group (RSA) 503.00p +14.89%
Hikma Pharmaceuticals (HIK) 2,239.00p +7.64%
GKN (GKN) 315.10p +6.81%
Johnson Matthey (JMAT) 2,817.00p +2.62%
Burberry Group (BRBY) 1,553.00p +2.44%
ITV (ITV) 270.00p +2.39%
Anglo American (AAL) 789.80p +2.23%
Glencore (GLEN) 210.05p +2.16%
BP (BP.) 395.20p +2.04%
InterContinental Hotels Group (IHG) 2,609.00p +1.95%

FTSE 100 - Fallers
Royal Mail (RMG) 489.50p -2.88%
Randgold Resources Ltd. (RRS) 3,734.00p -1.58%
Babcock International Group (BAB) 1,047.00p -1.23%
ARM Holdings (ARM) 988.00p -0.75%
Fresnillo (FRES) 621.50p -0.64%
Tesco (TSCO) 213.35p -0.44%
AstraZeneca (AZN) 4,180.50p -0.24%
Morrison (Wm) Supermarkets (MRW) 181.00p -0.22%
National Grid (NG.) 834.30p -0.17%
Centrica (CNA) 273.40p -0.11%

FTSE 250 - Risers
Virgin Money Holdings (UK) (VM.) 415.30p +10.92%
Melrose Industries (MRO) 280.10p +10.10%
Drax Group (DRX) 276.10p +9.35%
Informa (INF) 584.00p +7.65%
Domino's Pizza Group (DOM) 844.00p +5.04%
NMC Health (NMC) 871.00p +4.56%
Beazley (BEZ) 340.10p +3.56%
Indivior (INDV) 267.90p +3.32%
Kaz Minerals (KAZ) 163.20p +3.16%
Lonmin (LMI) 56.15p +2.46%

FTSE 250 - Fallers
Wizz Air Holdings (WIZZ) 1,648.00p -3.06%
Saga (SAGA) 207.80p -2.40%
Jardine Lloyd Thompson Group (JLT) 997.50p -1.82%
Greencore Group (GNC) 313.50p -1.60%
Riverstone Energy Limited (RSE) 970.00p -1.52%
Fidelity China Special Situations (FCSS) 135.10p -1.46%
Renishaw (RSW) 2,109.00p -1.40%
CLS Holdings (CLI) 1,904.00p -1.35%
Tritax Big Box Reit (BBOX) 117.10p -1.18%
Centamin (DI) (CEY) 54.35p -1.18%