FTSE 100 Live: Federal Reserve rates outlook feeds market caution

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FTSE 100 slips, Balfour Beatty adds 2%

The FTSE 100 index is down 12.57 points at 7503 as sentiment is impacted by the prospect of more big interest rate hikes in the UK and United States.

The top flight’s decline also reflected a large number of stocks trading without the right to their most recent dividend award. They included Legal & General, Berkeley, GSK, Anglo American, Prudential, LSE, Aviva and HSBC.

The biggest risers in the FTSE 100 were Ocado, Persimmon and Barratt Developments after gains of more than 1%.

The UK-focused FTSE 250 edged 49.35 points higher to 20,076.39, with construction and infrastructure group Balfour Beatty adding a further 2% on top of the 10% surge seen yesterday on the back of strong half-year results.

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AO World posts £37m loss but shares rise

Annual results from online electricals retailer AO World have highlighted the impact of supply chain disruption, labour shortages and a growing cost of living crisis for consumers.

Revenues of £1.37 billion in the UK were down by 4.6% from 2021’s strong performance during Covid lockdowns, but represented a 52% rise on a like-for-like pre-pandemic basis.

The various logistical challenges encountered during the year reduced underlying earnings to £8.5 million and meant the Bolton-based company recorded a bottom-line loss of £37 million, compared with £20 million profit the year before.

Shares have fallen from more than 230p in September to below 40p, but were up 10% to 44p today after AO said its estimate on the costs of closing its German business will be at the low end of its previous guidance at no more than £5 million.

Recent trading in the UK has been in line with AO’s expectations for the 2023 financial year, which is for revenues of between £1 billion and £1.25 billion and underlying earnings of between £20 million and £30 million.

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Fed rate rise outlook hits US markets

Evidence that Federal Reserve policymakers are not yet ready to alter their hawkish view on interest rates weighed on US markets yesterday.

Minutes of the Fed’s most recent meeting at the end of July showed little change in the commitment to get inflation back towards 2%, although members did raise concerns they might tighten too much given the lagging impact of rate hikes.

They said it would become “appropriate at some point to slow the pace of policy rate increases”, but there was little in the report to back up recent stock market optimism about the emergence of a “Fed pivot”.

Inflation data published since the meeting has been better-than-expected and policymakers will have a further set of price and jobs figures to digest before their next decision on 21 September.

US rates are currently in a target range of 2.25% to 2.5% but the comments from the Fed officials point to a further increase of 1.5% by the year end.

The Dow Jones Industrial Average fell 0.5% and the tech-focused Nasdaq Composite lost more than 1%, with disappointing earnings reports also a factor in the poor performance.

The FTSE 100 dropped 0.3% to 7515 yesterday after a three-day winning run and is expected to open slightly lower today.

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