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Wall Street mixed ahead of Fed interest rate decision as FTSE closes higher

A look at how the major markets are performing this Wednesday

FTSE  Washington, USA. 22nd Mar, 2023. U.S. Federal Reserve Chair Jerome Powell attends a press conference in Washington, DC, the United States, on March 22, 2023. The Fed raised interest rates by 25 basis points at the conclusion of its two-day meeting on Wednesday, lifting the target range of the federal funds rate to 4.75-5 percent. Credit: Liu Jie/Xinhua/Alamy Live News
FTSE and Wall Street investors await the Federal Reserve interest rate decision at 2pm EDT (7pm BST). Photo: Liu Jie/Xinhua/Alamy Live News

The FTSE 100 and European stocks rebounded and closed higher this Wednesday ahead of the Fed's interest rate decision.

The FTSE 100 (^FTSE) rose 0.22% to close at 7,798 points, while the CAC 40 (^FCHI) in Paris gained 0.25% to 7,402 points. In Germany, the DAX (^GDAXI) advanced 055% to 15,812.

FTSE

Pearson (PSON.L), the educational publisher, is the top riser on the FTSE 100, up 9.44%. Yesterday Pearson’s shares tumbled 15%, as the education sector was rattled by fears that artificial intelligence could upend their business models.

There was no such bounceback for BP (BP.L) shares, however, as the oil giant lost 0.41%.

Among the blue-chips reporting, Lloyds Banking Group (LLOY.L) fell 3.62% even as it beat profits expectations and Flutter Entertainment (FLTR.L) tumbled 1.14%.

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Shares in consumer healthcare business Haleon (HLN.L) dropped 3.22% as it reported earnings of 4.2p per share for the first quarter of the year, below forecasts of 5.24p per share.

Luxury carmaker Aston Martin Lagonda (AML.L) has lost 4.18% after reporting a narrower quarterly pre-tax loss and maintaining its 2023 outlook.

Investors are also processing the new measures announced to encourage companies to float on the London stock exchange rather than abroad as the changes would expose investors to more risk.

Over at the Barclays (BARC.L) AGM, climate protesters disrupted chairman Nigel Higgins, less than 5 minutes into the meeting with a special rendition of the Spice Girls’ hit single “Stop Right Now’.

Protesters from Fossil Free London also disrupted the Barclays AGM, telling the bank that “enough is enough”.

US and Asian financial markets

Wall Street was mixed ahead of the US Federal Reserve's interest rate decision later.

The Dow Jones (^DJI) lost 0.18% to 33,623 points. The S&P 500 (^GSPC) was muted at 4,116 points and the tech-heavy NASDAQ (^IXIC) advanced 0.15% to 12,099.

It's been a wild ride for First Republic, which teetered on the brink of failure for nearly two months. The regional lender last week revealed that deposit outflows totalled over $70bn in the first quarter.

Investors are worried the worst isn't over for regional banks. The S&P 500 regional banking index (KRE) lost over 6% o Tuesday, hitting a new 52-week low, according to Bespoke Investment Group. Shares of PacWest Bancorp (PACW) sank over 27%, while Western Alliance (WAL) plunged as much as 15%. The financial industry weighed down the S&P 500 by more than 2%.

Investors are also trying to gauge how much longer the Federal Reserve may need to hike interest rates.

The US Federal Reserve is expected to raise US interest rates again tonight, as it tries to push inflation down to its 2% target.

The Fed’s FOMC committee is forecast to lift its benchmark policy rate by a quarter of one percent, to a new target range of 5%-5.25%, the highest level since mid-2007.

Susannah Streeter at Hargreaves Lansdown said: “Caution is set to take centre stage ahead of the Fed’s interest rate decision later, as investors mull what’s ahead for the mighty US economy.”

Read more: Lloyds profits up 46% after interest rates surge

“Worries have ratcheted up again that a maelstrom of problems are lurking within regional banks and that there could be another breakage as interest rates are set to be hiked again.”

Asian shares declined, tracking losses on Wall Street as shares of beleaguered banks tumbled again and worries about the US economy deepened.

Markets in Japan and China were closed Wednesday for holidays. In Hong Kong, the Hang Seng (^HSI) index lost 1.32% to 19,670 points.

Pound

The pound’s (GBPUSD=X) gained ground against the dollar, pushing above the $1.25 level in early trade.

The sterling (GBPEUR=X) was steady against the euro, trading at €1.1340.

Oil markets

Meanwhile, Brent crude (BZ=F) plunged and was trading at around $72/barrel on renewed market fears over unremarkable industrial data out of China and the possibility that the Fed could hike rates again.

Higher interest rates would lead to an economic slowdown, curtailing oil demand.

Ole Hansen, head of commodity strategy at Saxo, said: "Risk sentiment in general was challenged by continued worries about the stability of the regional US banking system despite the bailout of First Republic by JP Morgan.

"Despite current demand and growth concerns, the Fed is expected to hike once again later today, and it continues to weigh on the demand outlook even as supply side is looking stable for now."

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