Stocks Pare Gains Ahead of Fed

The FTSE 100 has edged higher as investors await the Federal Reserve’s decision on interest rates which could mark the first United States hike since 2006.

Citing improvement in the US economy, Fed policy makers, led by Chairwoman Janet Yellen, voted unanimously to lift short-term borrowing rates by a quarter-point to a range of 0.25% to 0.5%.

“Investors are no doubt relieved that the Fed has finally got around to raising interest rates, removing some policy uncertainty, while the normalisation of monetary policy also provides a much needed signal of confidence in the U.S. economic recovery”, said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ.

The blue-chip FTSE 100 index rose 1.5 percent, lagging gains of more than 2 percent in Germany and France as a drop in stocks in the heavily weighted mining sector curbed the British market’s overall progress. Investors in the eurozone were similarly cautious: the French CAC 40, German DAX 30 and Spanish Ibex were broadly flat, while Italy’s FTSE MIB dipped 0.6%.

On the corporate front, UK-based drugmaker AstraZeneca Plc. has entered into an agreement to invest in a majority equity stake in Acerta Pharma, a privately-owned biopharmaceutical company based in the Netherlands and the U.S. AstraZeneca will acquire 55 percent of the entire issued share capital of Acerta for an upfront payment of $2.5 billion. Some traders said the FTSE was well set for the rest of the year.

UBS reported the successful completion of the cash tender offers, announced on December 4.

In response, the dollar has clocked up advances against most other currencies. In the previous session, the major averages ended the day firmly in positive territory, just off their highs for the session.