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London close: Stocks gain, all eyes on US Federal Reserve

Stocks recovered from early selling during the final hour of the session as traders reacted to the release of the text of the US central bank chief's semi-annual monetary policy report to Congress, which according to market observers at first glance did not appear to point to an overly hawkish Federal Reserve.
That is to say, it did not appear to shut the door to the possibility of just three more interest rate hikes over the course of 2018, instead of four as per the most recent projections from several economists.

Nevertheless, caution still seemed to be the watchword amongst traders.

Against that backdrop, the FTSE 100 finished the day 0.11% shedding 7.98 points to 7,244.41. For the week, it was 50.29 points lower.

Meanwhile, and ahead of possible remarks from several top officials from the US Federal Reserve later in the day, the yield on the benchmark 10-year US Treasury note was five basis points lower to 2.87% (below where it had closed the previous week), while that on similarly-dated Gilts was down by three basis points at 1.52%.

Commenting on Friday's market action, Chris Beauchamp at IG said: "While the FTSE 100 suffers, US and European markets are looking more robust. However, the hope of strong gains for US markets is dimmed by the knowledge of the late-day selloff that has hobbled Wall Street over the past two sessions. It is thus sensible to avoid counting chickens until they have been hatched," said IG's Chris Beauchamp.

In a reflection of the above, perhaps, overnight strategists at Bank of America-Merrill Lynch cautioned that their proprietary Bull & Bear indicator was still in 'sell' territory, with the various financial markets indicators used to construct it pointing to uncomfortably high levels of 'bullishness' among investors.

BofA-ML also pointed out to clients the recent inverse correlation between the US dollar and Treasury bond yields, a rarity which had only been observed less than 10% of the time over the past half century.

And when it had occurred, they said in the same research report sent to clients, it had coincided with "bouts of inflation and/or market volatility [...] on average inflation rose 2 percentage points, equities fell 9% and volatility rose 22 percentage points; higher wages remains the obvious risk to investors; higher wages & peak profits/growth much less anticipated."

In corporate space, Royal Bank of Scotland was under the cosh even as it clambered back into the black in 2017 for the first time in a decade. The taxpayer-owned bank took a hit in the fourth quarter from higher charges and warned of higher restructuring costs in 2018 and reminded of looming threat of US and UK regulatory settlements.

Joshua Mahony, a market analyst at IG, said: "Coming off the back of positive earnings from Lloyds, there is a clear benefits of being free from any government stake, which will continue to loom over RBS until the stake is finally sold."

International Consolidated Airlines Group also sustained big losses as its reported 19% jump in full-year operating profit fell short of analysts' expectations.

Bookmaker William Hill on the other hand managed to climb out of a crater after news it had swung to a £75m pre-tax loss in 2017 compared to a profit of £181m the year before saw the shares get bombed out in early trading.

The opposite was true for educational publisher Pearson, which reversed earlier gains to trade a touch lower despite moving into a full-year pre-tax profit of £421m from a £2.5bn loss the year before.

On the bright side, BT racked up strong gains as telecoms regulator Ofcom eased price controls on its network subsidiary Openreach.

Analyst Michael Hewson at CMC Markets noted: "Ofcom moderated its approach on the price controls on the company's Openreach division for access to the fibre broadband network. The original proposal mooted a charge of £11.23, but this has changed to £11.92 a potential net improvement of £80m over four years."

Standard Life Aberdeen shares also fell after confirming the sale of its insurance arm to Phoenix for £3.2bn alongside its final results. Phoenix rallied on the news.

Life insurer Aviva finished lower after saying it has sold two more life and pensions joint ventures in Spain for £178m in cash, while Rightmove gained as it reported a 10% jump in full-year operating profit as revenue and customer numbers grew.

In broker talk, Barclays was reinstated at 'buy' at Cenkos Securities, while Lancashire was upgraded to 'neutral' at Credit Suisse.

Moneysupermarket was cut to 'hold' at Canaccord, BAE Systems was downgraded to 'underweight' at JPMorgan and Petrofac was cut to 'underweight' by Morgan Stanley.

Market Movers

FTSE 100 (UKX) 7,244.41 -0.11%
FTSE 250 (MCX) 19,801.05 0.33%
techMARK (TASX) 3,320.07 -0.38%

FTSE 100 - Risers

BT Group (BT.A) 244.05p 5.04%
United Utilities Group (UU.) 686.80p 3.43%
Severn Trent (SVT) 1,766.00p 3.27%
British American Tobacco (BATS) 4,460.00p 2.42%
British Land Company (BLND) 650.40p 1.98%
DCC (DCC) 6,765.00p 1.50%
Centrica (CNA) 144.15p 1.41%
Hammerson (HMSO) 475.77p 1.36%
SSE (SSE) 1,251.50p 1.25%
RSA Insurance Group (RSA) 639.80p 1.14%

FTSE 100 - Fallers

International Consolidated Airlines Group SA (CDI) (IAG) 587.20p -5.69%
Royal Bank of Scotland Group (RBS) 268.40p -4.82%
Smurfit Kappa Group (SKG) 2,502.00p -3.85%
BAE Systems (BA.) 565.00p -3.42%
easyJet (EZJ) 1,631.50p -3.15%
Standard Life Aberdeen (SLA) 376.10p -2.49%
Smith (DS) (SMDS) 479.90p -2.18%
Randgold Resources Ltd. (RRS) 6,014.00p -1.89%
St James's Place (STJ) 1,121.50p -1.84%
Micro Focus International (MCRO) 2,031.00p -1.74%

FTSE 250 - Risers

Phoenix Group Holdings (DI) (PHNX) 815.00p 7.31%
CLS Holdings (CLI) 224.50p 6.40%
TalkTalk Telecom Group (TALK) 102.80p 5.22%
Hunting (HTG) 644.50p 4.29%
Playtech (PTEC) 782.20p 4.04%
Rightmove (RMV) 4,482.00p 3.99%
IP Group (IPO) 114.60p 3.62%
Bodycote (BOY) 948.50p 3.60%
Clarkson (CKN) 3,295.00p 3.44%
Fenner (FENR) 479.80p 3.32%

FTSE 250 - Fallers

SIG (SHI) 143.10p -4.60%
Vectura Group (VEC) 72.25p -4.18%
Man Group (EMG) 179.15p -3.97%
Rathbone Brothers (RAT) 2,652.00p -3.56%
Sophos Group (SOPH) 499.60p -3.37%
Indivior (INDV) 382.70p -2.51%
Purecircle Limited (DI) (PURE) 430.00p -2.49%
Moneysupermarket.com Group (MONY) 276.80p -2.40%
AA (AA.) 86.04p -2.23%
Intermediate Capital Group (ICP) 1,048.00p -2.05%

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