The FTSE 100 faded into the close to end lower on Wednesday after a White House official told Bloomberg News that Donald Trump is likely to fire Federal Reserve chairman Jerome Powell.
The blue-chip index had earlier traded in the green, shrugging aside stronger-than-expected inflation data.
The FTSE 100 closed down 11.77 points, 0.1%, at 8,926.55. It had earlier traded as high as 8,972.29.
The FTSE 250 ended down 88.60 points, 0.4%, at 21,601.86, but the AIM All-Share rose 1.07 points, 0.1%, at 772.10.
According to the Office for National Statistics, the UK annual consumer price inflation rate accelerated to 3.6% in June, from 3.4% in May.
According to FXStreet cited consensus, it had been expected to remain at 3.4% in June.
Costs for transport, particularly motor fuels, made the largest upward revision to the annual inflation rate, the ONS said.
Core consumer prices, excluding energy, food, alcohol and tobacco, rose 3.7% annually in June, topping the FXStreet cited consensus which had pencilled in another 3.5% hike, which would have matched the May increase.
The annual service price inflation rate was unchanged at 4.7% in June, the ONS said.
Barclays said the “tricky print” should keep the Bank of England “cautious and gradual”.
“The overshoot in inflation itself is problematic but, we think, within the tolerance range of the [Monetary Policy Committee] for data outturns relative to its forecast, especially given the role played by air fares and the fact that core goods is undershooting relative to the May forecast.”
Barclays felt the lack of progress on underlying services was of more concern and likely to give the central MPC members enough reason to remain cautious, even as “we expect the labour market loosens in the coming months”.
“Governor (Andrew) Bailey has said that he is waiting to see the pass-through of a loosening labour market in inflation data before he can be more committal than gradual, and that is not present in today’s print.”
Barclays said Thursday’s labour market data will be key.
“Altogether, we expect the committee to cut in August and remain on a gradual path for the removal of restriction to neutral, at a quarterly pace to 3.5% by February 2026.”
Bank of America said the stronger-than-expected data was unlikely to derail an August rate cut.
“But there will be increased focus now on tomorrow’s labour market data to validate continued easing in pay and softer employment dynamics,” BofA said.
“We expect a continued slowing in private regular pay growth to 4.8% year-on-year, unemployment to rise to 4.7%, above the BoE’s forecast of 4.6% and June payrolls at minus 70,000 with May’s payrolls revised upwards from minus 109,000 to minus 65,000.
“In our view labour market data would be key in determining the rate outlook,” BofA added.
Stocks in New York gave back early gains, while bond yields rose and the dollar fell after the report that the US president could fire Fed chief Mr Powell.
Bloomberg sources said Mr Trump discussed the possible move in a meeting with congressional Republicans on Tuesday night.
The president has repeatedly expressed frustration over the central bank’s decision to hold interest rates steady.
Dan Coatsworth, investment analyst at AJ Bell, said: “Markets in both the UK and US pulled back amid speculation that Trump was about to fire Powell.
“He hasn’t been shy in expressing displeasure in Powell’s decision-making, demanding the Fed bring down rates to help drive economic activity. He wants someone new behind the wheel at the central bank, and someone who will influence looser monetary policy.”
The Dow Jones Industrial Average was down 0.3%, as was the S&P 500 index, while the Nasdaq Composite fell 0.4%.
According to the Bureau of Labour Statistics producer prices rose 2.3% on-year in June, easing from a 2.7% climb in May.
June’s growth was tamer than expected. According to FXStreet cited consensus, a producer rise of 2.5% on-year was expected.
Month-on-month, producer prices were flat in June, defying expectations of a 0.2% climb. They had edged up 0.1% in May from April.
Goldman Sachs fell 1.6% despite reporting its best ever quarter for trading revenues, as they benefitted from the April volatility. Morgan Stanley fell 3.6% while Bank of America dipped 1.7%.
The yield on the US 10-year Treasury was quoted at 4.48%, up from 4.43%. The yield on the US 30-year Treasury was quoted at 5.06%, up from 5.02%.
The pound was quoted at 1.3473 dollars at the time of the London equities close on Wednesday, up from 1.3380 dollars on Tuesday. The euro rose against the dollar to 1.1708 from 1.1604.
Against the yen, the dollar was trading lower at 147.97 compared with 148.97.
In European equities on Wednesday, the Cac 40 in Paris closed down 0.6%, while the Dax 40 in Frankfurt fell 0.2%.
In London, Intermediate Capital Group shares rose 3.4%, the best large-cap performer. It said the investment landscape remains “very attractive” as it reported an increase in assets under management in its financial first quarter.
The London-based private equity investment firm said assets under management were 122.58 billion dollars on June 30, the end of its financial first quarter, up 9.1% from 112.36 billion dollars on March 31, or by 3% at constant currency.
Year-on-year, AUM increased 22% from 101.00 billion dollars, or by 15% at constant currency.
Insurer Hiscox rose 2.6% as Morgan Stanley raised the stock to “overweight”.
Recruiter Hays fell 1.5% after Morgan Stanley cut it to “underweight”.
Diageo rose 0.6% after it said chief executive Debra Crew had stepped down with immediate effect by mutual agreement, with the chief financial officer stepping up on an interim basis.
The London-based owner of Guinness and Johnnie Walker said it has started a formal search process to replace Ms Crew, which will include internal and external candidates.
CFO Nik Jhangiani will take on the role of chief executive in the interim.
Analysts at Citi said: “Although Debra’s tenure as CEO may have been viewed as turbulent, we note that many of the factors impacting the business were spirit industry-wide. As such we think today’s initially positive share price reaction to the news is primarily driven by short-covering.”
The broker added that “until clarity on a new CEO is forthcoming, investor re-engagement in the stock is likely to remain limited”.
Brent oil fell to 67.87 dollars a barrel at the time of the London equities close on Wednesday, from 68.94 dollars late on Tuesday.
Gold was quoted higher at 3,371.80 dollars an ounce against 3,331.36.
The biggest risers on the FTSE 100 were Intermediate Capital Group, up 67.0 pence at 2,044.0p, Hiscox, up 32.0p at 1,274.0p, 3i Group, up 60.0p at 4,210.0p, Beazley, up 13.0p at 912.0p and British American Tobacco, up 55.0p at 3,873.0p.
The biggest fallers were Ashtead, down 124.0p at 4,679.0p, Croda International, down 68.0p at 2,854.0p, WPP, down 8.7p at 411.7p, Pershing Square Holdings, down 80.0p at 4,100.0p and Melrose, down 9.4p at 520.8p.
Contributed by Alliance News
