Investors defy pressures and push prices higher
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7.30pm: Fed raises interest rate
Federal Reserve officials raised interest rates by an expected 75 basis points for the third consecutive time and forecast they would reach 4.6% in 2023.
In a statement following a two-day meeting in Washington, the Federal Open Market Committee repeated that it “is highly attentive to inflation risks.” The central bank also reiterated it “anticipates that ongoing increases in the target range will be appropriate,” and “is strongly committed to returning inflation to its 2% objective.”
The US central bank’s quarterly economic projections, meanwhile, showed the economy slowing to a crawl in 2022, with year-end growth at 0.2%, rising to 1.2% in 2023, well below the economy’s potential. The unemployment rate is projected to rise to 3.8% this year and 4.4% in 2023. Inflation is seen slowly returning to the Fed’s 2% target in 2025.
The S&P 500 briefly turned lower then was up 10.82 points, or 0.28%.
5pm: Stocks defy pressures
Investors across Europe pushed ahead in defiance of growing tension between Russia and Ukraine and the prospect of aggressive monetary tightening by the central banks.
Housebuilders closed higher on expectations of a rise in interest rates by the Bank of England tomorrow. Taylor Wimpey rose 3.6%, Barratt added 3.1% and Persimmon shares climbed 4.2%.
Aveva was up after Schneider Electric confirmed a £9.5bn takeover deal, while BAE Systems jumped as Putin’s escalation of Russia’s investigation of Ukraine bolstered defence stocks.
The FTSE 100 index closed up 44.98 points, or 0.6%, at 7,237.64, having fallen in the two previous sessions. The mid-cap FTSE 250 index ended 1%, higher.
Wall Street also managed gains ahead of the Fed’s expected 75 basis points rate hike. The Dow Jones Industrial Average was up 0.5%, the S&P 500 climbed 0.6%, while the Nasdaq Composite was 0.4% higher.
The beleaguered pound, however, almost fell below the $1.13 mark.
7am: Galliford Try
Construction group Galliford Try said it continues to see good demand across its core markets and anticipates continued progress in the new financial year, in line with targets.
It said it had successfully managed and mitigated the challenges of supply shortages and inflation without any overall impact on trading or margin.
The contractor said profit before tax rose 68% to £19.1m before exceptional costs from £11.4m last time.
A proposed final dividend of 5.8p per share, together with the interim dividend of 2.2p will result in a total dividend for 2022 of 8p per share.
7am: Unite sells Aberdeen properties
Unite Students, the owner, manager and developer of student accommodation, has sold six properties in Aberdeen, comprising 1,050 beds for £33 million (Unite share: £20m) to Clearbell Property Partners, a fund managed by Clearbell Capital. Full story here
7am: JD Sports reaches Cowgill agreement
JD Sports has reached a settlement with former executive chair Peter Cowgill who was ousted in May. The deal includes a three-year consultancy agreement and will see him receive £5.5m in addition to his salary package.
Global markets – Ford falls
Ford Motor Co. slumped 12.3%, its deepest one-day decline since January 2011, after warning of a $1bn hit from inflationary pressures together with supply chain issues.
The company’s statement also sent shares of rival General Motors down 5.6% as analysts said it might take more time for vehicle manufacturers to recover from chip shortages.
Deutsche Bank analyst Emmanuel Rosner said: “It appears that across the industry, chip and components shortages may be improving at a slower pace than anticipated.”
In July, Ford said it expected commodity costs to rise $4 billion for the year.
Courier service FedEx withdrew its financial forecast due to slowing global demand.
The comments from two of the US’s biggest employers highlight the dilemma facing the Federal Reserve ahead of its policy-making meeting today.
The Fed is widely expected to hike rates by 75 basis points in the fight to control inflation. But its aggressive monetary policy campaign has seen the US stock market take a battering.
London was expected to open lower following falls in the US overnight.
The Dow Jones Industrial Average was down 1.01%, the S&P 500 fell 1.13% and the Nasdaq Composite slipped 0.95%.