FTSE 100 edges up ahead of Fed decision

The big story for Wednesday is the conclusion of the U.S. Fed’s two-day policy-setting meeting.

It would be the first time that the Fed has increased rates since 2006 but the bank is expected to be very cautious, hiking by 25 basis points this month and only gradually and intermittently thereafter. The question for financial markets remains how much of this expected hike has already been baked into asset prices.

London’s FTSE 100 rose 1.4% to 6,148.61, Frankfurt’s Dax rose 1.88% to 10,666.2 and the Cac 40 in Paris rose 1.95% to 4,714.85.

“While the beginning of the tightening cycle should of course be viewed positively as it typically indicates strong economic performance, for a long time this has been more feared than welcomed as many have questioned the ability of the economy to withstand higher rates”, said Craig Erlam, senior market analyst at Oanda.

Overall, this year has been a hard year for stocks, but if the rate hike does come, then this is a clear signal that the economy is getting better.

After the Fed’s decision, the dollar rose against larger major currencies. The Sterling was down to $1.50 against the dollar at the close of trading.

Benchmark ten-year gilt yields fell 0.056 percentage points to 1.89%.

SHELL/BG GROUP – Royal Dutch Shell’s takeover of BG Group may look less attractive after the slide in oil prices but the fact that the same investors own almost half of both firms means the deal is still likely to go through, analysts have told Reuters.

“The broadly static trend in the headline readings this month belies what we consider to be a very encouraging set of surveys”.

European equity futures fell on Friday, tracking a drop in Asian and U.S. equity markets which settled back after a surge higher in the previous session. This was not helped by losses following the recent unemployment data, which showed that wage growth was slowingdown.

Shares in rose 5.1% after research indicated it had increased its market share. The announcement follows a series of profit warnings.

In London, Standard Chartered jumped 7.8%.