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FTSE 100 edges higher as Fed nerves ease; Lloyds in demand after strong Q1


The FTSE 100 opened in positive territory ahead of the US Federal Reserve call on interest rates with traders betting that Jerome Powell and his cohort will maintain their ultra-accommodative monetary stance.

There have been a few market wobbles of late with America’s rapid vaccination programme sparking a faster than anticipated economic rebound, which in turn precipitated inflationary fears.

“Assuming that the Fed stays resolutely on-message, I expect buy-everything-business-as-usual to return shortly thereafter,” said Jeffrey Halley, analyst at OANDA.

The banks led the early charge, prompted by stellar quarterly results from Lloyds Banking Group (LON:LLOY), which was marked 4.8% higher.

“[It] is seeing the benefit of the rising tide of sentiment in the UK and its numbers reflect a recovery play in action,” said Richard Hunter, head of markets at Interactive Investor.

“This time a year ago as the UK economy was going into freefall, the banks found themselves in the eye of the storm.

“This latest update from Lloyds encapsulates the improvements that have been seen since, and the release of £459mln of bad loan provisions is a strong indication of an improving economic outlook.”

NatWest (LON:NWG), up 2.9%, was pulled higher in Lloyds’ wake.

Also on the up was Persimmon (LON:PSN), which rose 2.2% after saying house sales are now 11% ahead of pre-pandemic levels.

Finally, the completion of the Wickes demerger saw an 11% reverse in the fortunes of its owner Travis Perkins (LON:TPK).

6.55 am: Front foot start predicted 

The FTSE 100 is expected to start Wednesday’s session on the front foot as traders await the latest interest rates decision from the US Federal Reserve.

Spread-betters IG expect the blue-chip index to open around 25 points higher after ending Tuesday’s session down 18 points at 6,944.

When the Fed meets later today traders are likely to keep an eye on what the central bank’s chair Jerome Powell makes of recent improvements in US economic data, with consumer confidence figures for April beating expectations.

The key concern will be whether the current pace of economic recovery will be the high water mark or whether the Fed thinks there is more improvement to come, which in turn could see fresh movements for US Treasuries in the bond markets.

“The belief that this is as good as it gets probably seems a little naïve right now, and while the Fed will be pleased at how the economy is looking based on current data, we will probably still need to see another couple of decent payrolls reports, before we start to see the central bank starting to prepare the ground for a slight change in tone. Until then, Powell will be keen to temper any enthusiasm or foster any expectation of a change in stance, even if officials do alter their dot plot forecasts to signal a slightly earlier taper”, said Michael Hewson at CMC Markets.

Meanwhile, traders will also be hoping for a better performance on Wall Street after a relatively flat session overnight saw the Dow Jones Industrial Average close up just 0.01% at 33,984 while the S&P 500 dropped 0.02% to 4,186 and the Nasdaq fell 0.34% to 14,090.

The picture was looking brighter in Asia this morning, with Japan’s Nikkei 225 rising 0.37% while Hong Kong’s Hang Seng was up 0.21%.

On currency markets, the pound was down 0.2% against the dollar at US$1.388, although the upcoming Fed commentary could provide some catalyst for movement.

Around the markets:

Sterling: US$1.388, down 0.2%

Brent crude: US$66.39 a barrel, down 0.05%

Gold: US$1,770 an ounce, down 0.6%

Bitcoin: US$54,870, up 1.78%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Wednesday as India’s new COVID-19 cases increased by 360,960, the highest ever daily count for any country, along with 3,293 deaths.

The Hang Seng index in Hong Kong gained 0.15% while the Shanghai Composite in China fell 0.05%.

In Japan, the Nikkei 225 advanced 0.43% but South Korea’s Kospi slipped 0.89%.

Shares in Australia gained, with the S&P/ASX 200 trading 0.46% higher.

Proactive Australia news:

Corella Resources Ltd (ASX:CR9) has resumed trading on the ASX after raising $5 million from a public offer at 2 cents per share.

PNX Metals Ltd (ASX:PNX) first mineral resource estimate for the newly acquired Glencoe Deposit has enhanced development plans for the Fountain Head Gold Project in the Northern Territory.

Galena Mining Ltd (ASX:G1A) (FRA:GM6) has achieved key objectives from the 2020 Abra Drilling Program with a subsequent updated JORC 2012 resource estimate helping to increase confidence in the Abra Base Metals Project in Western Australia.

Auroch Minerals Ltd (ASX:AOU) (FRA:T59) has intersected nickel sulphide mineralisation along strike in a maiden reverse circulation (RC) program at the high-grade Nepean Nickel Project south of Coolgardie, Western Australia.

Caspin Resources Ltd (ASX:CPN) has intersected significant zones of sulphides in diamond drilling at the XC-29 Prospect within the Yarawindah Brook Nickel-Copper-PGE Project in Western Australia.

Mako Gold Ltd’s (ASX:MKG) high-grade results have extended multiple parallel lodes from surface to 200 metres vertical on a section of Tchaga prospect that previously returned 41 metres at 4.51 g/t at Napié Gold Project in Côte d’Ivoire.

Bardoc Gold Ltd (ASX:BDC) (FRA:4SF) passed an important milestone during the March quarter by delivering a robust definitive feasibility study (DFS) for the flagship Bardoc Gold Project in Western Australia.

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