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London close: Stocks hug the flatline ahead of Fed's Powell, rate decision
London stocks finished the session little changed as investors bid their time ahead of the US central bank's policy announcement which was scheduled for later on Wednesday evening.
Another 25 basis point interest rate hike, 2018's second, had been widely anticipated, but analysts were divided on whether rate-setters would flag that a slightly faster pace of policy tightening lay ahead as well.
The FTSE 100 ended down by just 0.10 points at 7,703.71 with the pound also little changed versus the US dollar, at 1.33797, albeit well-off its lows of the session.
Earlier, the latest set of CPI numbers from the Office for National Statistics had shown that UK inflation was steady last month, weakening the case for the Bank of England to hike interest rates in August.
"We have slightly revised down our inflation profile as underlying components of the May print surprised us on the soft side. We believe that this supports further our view that inflation is not an imminent threat and that the BoE should maintain rates unchanged this year and next," Fabrice Montagne at Barclays Research said in a note sent to clients.
Against the euro on the other hand, Sterling was trading down 0.3% to 1.1352, as investors waited on the European Central Bank's own policy decision, which was set for the next day.
According to ONS, the year-on-year rate of consumer price inflation was unchanged at 2.4% in May. Some analysts had been expecting the rate to be unchanged while others had pencilled in an increase to 2.5%. The rate of increase remained above the BoE's 2% target but followed a series of mixed signals about the state of the UK economy.
Prices in May were supported by the rising cost of motor fuel and air and sea fares, which were affected by the timing of Easter. These upward pressures were partly offset by lower prices for games, domestic energy, food, non-alcoholic drink and furniture.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the figures showed underlying inflation was weak. Though CPI will probably rise in June, boosted by energy tariff increases, the downward trend is likely to return in the third quarter, he argued.
"With GDP growth looking sluggish, wages still failing to gather momentum and Brexit negotiations set to reach a climax towards the end of this year, the MPC now looks set to wait until 2019 before raising interest rates again," Tombs said.
Still to come, the Fed is due to make its latest policy announcement after the close of UK markets, at 1900 BST, with the main event set to be the quarterly economic projections and the press conference with chair Jerome Powell.
Oanda analyst Craig Erlam said: "The central bank has previously indicated that three rate hikes this year is likely but with the inflation picking up, the economy performing well and tax reforms having added an additional stimulus this year, a fourth could be on the cards.
"It will therefore be very interesting to see whether this is being factored into the economic projections yet or if policy makers still intend to take their time raising rates. There have already been suggestions that they will be willing to tolerate above target inflation but if prices are rising faster than anticipated - CPI inflation rose 2.8% in May, core CPI 2.2% - we should get an idea of just how much they will accept."
In corporate news, shares of Dixons Carphone slumped after revealing that the card data of 5.9m of its customers has been accessed by hackers, with records on 1.2m customers containing non-financial personal data also accessed.
Just Eat tumbled after rival Deliveroo said it will allow restaurants to use their own riders for orders made through its takeaway food app, upping its available outlets by 50%. Until now, only restaurants that agreed to use Deliveroo's riders could be listed on the app.
Glencore was on the way up after saying that its Katanga Mining subsidiary has settled a legal dispute with its state-owned joint venture partner in Democratic Republic of the Congo that threatened to dissolve Katanga's DRC operating subsidiary Kamoto Copper Company.
WPP finished on a down note following some tough questions at the advertising giant's annual shareholder meeting around the exit package for its ex-boss Martin Sorrell.
Stobart Group was a high riser as it said Ryanair will open a new base at its London Southend airport.
Outside the FTSE 350, British luxury brand Mulberry dipped after it posted a drop in annual profit on the back of start-up costs for its operations in Asia and announced a new business agreement in South Korea.
Tate & Lyle was weaker after Jefferies downgraded the stock to 'hold', but TalkTalk surged on an upgrade to 'buy' at Bank of America-Merrill Lynch.
Market Movers
FTSE 100 (UKX) 7,703.71 -0.00%
FTSE 250 (MCX) 21,232.87 -0.04%
techMARK (TASX) 3,553.96 0.09%
FTSE 100 - Risers
Glencore (GLEN) 398.00p 3.75%
Hargreaves Lansdown (HL.) 2,059.00p 2.18%
International Consolidated Airlines Group SA (CDI) (IAG) 712.20p 1.83%
easyJet (EZJ) 1,782.50p 1.71%
Sage Group (SGE) 685.40p 1.60%
Carnival (CCL) 4,707.00p 1.55%
Burberry Group (BRBY) 2,137.00p 1.47%
Antofagasta (ANTO) 1,081.50p 1.36%
InterContinental Hotels Group (IHG) 4,966.00p 1.35%
Old Mutual (OML) 225.10p 1.17%
FTSE 100 - Fallers
Just Eat (JE.) 810.00p -4.71%
Standard Chartered (STAN) 724.10p -1.72%
Sky (SKY) 1,335.00p -1.69%
DCC (DCC) 7,170.00p -1.58%
Vodafone Group (VOD) 185.60p -1.54%
Rolls-Royce Holdings (RR.) 828.60p -1.52%
Royal Bank of Scotland Group (RBS) 262.00p -1.39%
Direct Line Insurance Group (DLG) 351.00p -1.18%
Royal Dutch Shell 'A' (RDSA) 2,567.50p -1.10%
Kingfisher (KGF) 309.40p -1.09%
FTSE 250 - Risers
Stobart Group Ltd. (STOB) 263.00p 11.21%
TalkTalk Telecom Group (TALK) 123.80p 5.27%
FDM Group (Holdings) (FDM) 1,120.00p 4.09%
TI Fluid Systems (TIFS) 272.00p 3.03%
Wizz Air Holdings (WIZZ) 3,705.00p 2.63%
Electrocomponents (ECM) 753.20p 2.48%
Charter Court Financial Services Group (CCFS) 334.80p 2.40%
Equiniti Group (EQN) 256.50p 2.40%
Grafton Group Units (GFTU) 818.00p 2.31%
Games Workshop Group (GAW) 2,985.00p 2.23%
FTSE 250 - Fallers
Superdry (SDRY) 1,141.00p -6.48%
Bank of Georgia Group (BGEO) 1,880.00p -5.39%
Tate & Lyle (TATE) 643.00p -4.03%
Serco Group (SRP) 100.10p -3.66%
Coats Group (COA) 77.10p -3.63%
Ted Baker (TED) 2,272.00p -3.15%
Dixons Carphone (DC.) 192.30p -2.76%
Greencore Group (GNC) 180.00p -2.73%
Domino's Pizza Group (DOM) 351.70p -2.68%
Euromoney Institutional Investor (ERM) 1,378.00p -2.68%