Late market roundup: FTSE 100 down after ‘clearly hawkish’ Fed meeting

Stocks closed lower on Thursday, after the US Federal Reserve and the Bank of England left interest rates unchanged.

The FTSE 100 closed down 108.91 points, 1.0%, at 10,399.70. The FTSE 250 ended down 34.01 points, 0.2%, at 23,330.72, while the AIM All-Share fell 7.79 points, 1.0%, to 800.04.

The Cboe UK 100 ended down 1.1% at 1,031.59, the Cboe UK 250 was down 0.3% at 19,974.90, and the Cboe Small Companies was down 0.4% at 18,412.26.

After the European market close on Wednesday, the Federal Reserve left the federal funds rate target range at 3.50-3.75%, its fourth consecutive hold.

But the accompanying summary of economic projections saw Fed officials remove their prior outlook for a rate cut this year and indicate that a hike is possible. Eight members of the policymaking Federal Open Market Committee see rates staying unchanged, nine see higher rates and one sees lower.

Russ Mould, investment director at AJ Bell explained: ‘Even though the Federal Reserve wasn’t expected to raise US interest rates at its meeting last night, nine of the 18 committee members predicted an interest rate hike this year, while just one said they expected a cut.

‘That took the market by surprise and caused a wobble on Wall Street.’

On Wednesday, the S&P 500 fell 1.2% while the Nasdaq Composite ended down 1.3%.

‘Financial markets like cuts, and looser monetary policy was on the cards at the start of 2026. Now they’re having to recalibrate expectations and contend with new Fed chair Kevin Warsh’s style of communicating, which is blunt and to the point,’ Mould added.

The Fed meeting saw Kevin Warsh take over as Fed chair from Jerome Powell, who oversaw his last FOMC meeting in April.

Warsh repeatedly stressed that the FOMC ‘unambiguously and unanimously have decided we are going to deliver’ on its 2% inflation target.

Bank of America said the meeting was ‘clearly hawkish’ and it now sees a much higher risk of a hike this year.

David Morrison, senior market analyst at Trade Nation, noted the CME’s FedWatch Tool is now predicting an 85% probability of at least one 25 basis point rate hike before year-end, up from 60% ahead of the Fed statement.

The euro traded lower against the greenback, at $1.1477 on Thursday against $1.1591 on Wednesday. Against the yen, the dollar was trading at JP¥160.99, up from JP¥160.25 on Wednesday.

The Bank of England also left interest rates unchanged, although analysts now see a lower near-term risk of a hike.

In a widely expected move, the BoE’s Monetary Policy Committee voted 7-2 to leave the bank rate at 3.75%.

The central bank has maintained rates in each of its four meetings this year, with the last change a quarter-point cut to 3.75% in December.

Chief Economist Huw Pill put the case for a 25-basis-point rate hike, as he did in April. At the June meeting, Pill’s view was supported by Megan Greene.

BoE Governor Andrew Bailey said he was ‘content’ at the present time with holding, while accepting that risks to inflation and interest rates are on the upside.

RBC Capital Markets now expects the BoE to stay on hold after previously projecting a July rate hike.

While JPMorgan pushed forecasts for a rate rise back to November from July.

Aside from Greene’s additional dissent, JPMorgan analyst Allan Monks said the overall message was that ‘further evidence of disinflation has bought more time for the committee to wait and assess the risk of second-round effects and inflation persistence.’

Investors also weighed UK labour market figures, which showed the unemployment rate stood at 4.9% in April, slightly better than economists’ expectations for a reading of 5.0%.

Wage growth, however, accelerated to 4.4% in the three months to April, ahead of the 4.0% forecast. Excluding bonuses, wage growth was unchanged at 3.4%, but still topped expectations of 3.2%.

Private sector earnings growth came in at 2.9%, in line with forecasts, though easing from 3.0% previously.

The pound traded at $1.3246 on Thursday afternoon, down from $1.3393 on Wednesday. Against the euro, sterling ebbed to €1.1541 from €1.1554 on Wednesday.

In European equity markets on Thursday, the CAC 40 in Paris ended up 0.4%, as did the DAX 40 in Frankfurt.

In New York, markets rallied after Wednesday’s falls. The Dow Jones Industrial Average was up 0.3%, the S&P 500 was up 0.9%, and the Nasdaq Composite rose 1.2%.

Hopes for a slowdown in inflationary pressures were lifted as oil prices tumbled in the wake of the agreement between the US and Iran.

Brent crude for August delivery traded lower at $77.04 a barrel on Thursday, down from $80.11 at the time of the equities close in London on Wednesday.

Under the deal, Tehran has agreed to dilute its enriched uranium stockpile in exchange for significant economic relief.

Trump signed the memorandum of understanding during a dinner with French President Emmanuel Macron at the Palace of Versailles following the G7 summit.

The yield on the US 10-year Treasury firmed to 4.44% on Thursday from 4.43% on Wednesday. The yield on the US 30-year Treasury narrowed to 4.88% from 4.92% on Wednesday.

Gold traded at $4,230.61 an ounce on Thursday, down from $4,356.32 on Wednesday. This weighed on the share prices of Fresnillo and Endeavour Mining, down 5.8% and 5.7%, respectively, while Hochschild Mining fell 7.3%.

On the FTSE 100, Persimmon fell 6.2%, Land Securities fell 3.7%, 3i fell 2.5% and British Land fell 2.6% as they traded ex-dividend.

Tesco fell 0.9% after it reported sales of £16.83 billion in the 13 weeks ended May 20, with like-for-like growth of 1.0%, supported by growth in the UK stores and strong online demand.

Like-for-like sales in the UK grew 1.8%, below the Visible Alpha consensus of 2.3%, while LFL sales in the Republic of Ireland increased 3.3%, above 3.1% VA consensus. Central Europe LFL sales growth of 0.8% beat 0.6% VA consensus.

LFL sales at the Booker wholesaling arm fell 3.2%, worse than the VA consensus, which forecast a lesser decline of 2.4%

The biggest risers on the FTSE 100 were Informa, up 23.20p at 863.60p, Polar Capital Technology Trust, up 19.00p at 733.50p, International Consolidated Airlines Group, up 10.40p at 463.10p, JD Sports Fashion, up 1.88p at 86.72p and Halma, up 84.00p at 3,958.00p.

The biggest fallers on the FTSE 100 were London Stock Exchange, down 628.00p at 8,338.00p, Persimmon, down 69.00p at 1,050.00p, Fresnillo, down 193.00p at 3,117.00p, Endeavour Mining, down 254.00p at 4,180.00p and Relx, down 97.00p at 2,348.00p.

Friday’s global economic calendar has inflation figures in Japan overnight, and retail sales data in the UK and Canada. US financial markets are closed for Juneteenth.

Friday’s local corporate calendar includes full-year results from Cordiant Digital Infrastructure and Record.

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