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Oil and miners drive FTSE higher as Fed takes hikes off table

Federal Reserve signals it will hold back from raising interest rates for the rest of the year, driving FTSE 100 higher.

Oil and miners drive FTSE higher as Fed takes hikes off table

Oil stocks and miners have led the FTSE 100 higher after the US Federal Reserve signalled it would hold back from raising interest rates for the rest of the year.

The UK blue-chip index rose 46 points, or 0.6%, to 7,337, as forecasts from the Fed issued following its two-day policy meeting implied no hikes for the remainder of the year. Forecasts issued late last year had implied two.

'Although Fed Chair Jerome Powell reiterated data dependence of all monetary policy decisions, he struck a firmly dovish tone, making a 2019 rate hike highly unlikely,' said Wolfgang Bauer, manager of the M&G Absolute Return Bond fund.

'Powell acknowledged that growth in the US is slowing and he referred to mixed data in 2019. Several times Powell referred to slowing growth in China and particularly in Europe as well as to geopolitical risks, such as Brexit, and how these factors have become a headwind for the US economy.'

The news knocked the dollar, which fell sharply against a basket of other major global currencies last night. But the pound was unable to make gains against the greenback, weighed down by Brexit fears and trading 0.5% lower at $1.313.

Prime minister Theresa May yesterday evening hit out at MPs opposing her Brexit deal, saying a delay to the divorce agreement was ‘a matter of great personal regret’. 

May heads back to Brussels today to ask EU officials for a delay of three months, taking the Brexit deadline to 30 June. European Council president Donald Tusk has already said he will only grant an extension if May’s deal passes a parliament vote. 

The dollar's fall boosted commodities like oil and metals, which are priced in the currency, helping to lift miners to the top of the FTSE 100.

Miners were also buoyed by a possible tightening of supply after Vale (VALE3.SA) said it would halt production in a Brazilian mine. Rio Tinto (RIO) rose 1.9% to £42.83 and BHP Group (BHPB) was up 2% at £18.03. 

Oil majors continued to gain on Opec supply cuts and US sanctions against Iran and Venezuela. Shell (RDSb) was up 1.1% to £24.70 and BP (BP) advanced 1.1% to 562.3p.

Banks were meanwhile in the red as the prospect of US interest rate rises receded. Higher interest rates tend to boost bank margins.

Royal Bank of Scotland (RBS) fell 2.7% to 250.6p, Lloyds (LLOY) dropped 2.4% to 63.5p and Barclays (BARC) was down 1.9% at 161.3p.


Next (NXT) was also among  the fallers, dropping 2.1% to £50.68 as the clothing retailer reported a fall in annual profits. 

‘Ultimately the market backdrop continues to make life very difficult for Next and its peers,’ said AJ Bell investment director Russ Mould.

‘The full year results continue the theme of Next’s online gain and in-store pain. However, Next makes a fair point when it says that no-one knows what the high street will look like in 10 years, but we do know that there will be people walking down it wearing clothes.’

On the FTSE 250 Renishaw (RSW) tumbled 10.7% to £37.50 after the engineer issued a profit warning on softening growth in Asia. 

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