The FTSE 100 is projected to shed as much as 0.8% in early trade today despite gains on Wall Street and Asia after the Federal Reserve made its first step towards tightening its loose monetary policy by hiking the discount rate from 0.5% to 0.75%, which it charges banks for emergency loans.
The UK blue chip index gained nearly 1% yesterday, extending its winning streak to four days with defence and aerospace systems manufacturer BAE Systems (LSE: BA) in the lead with a 4.3% advance. Miners were in demand as metal prices increased. Eurasian Natural Resources (LSE: ENRC) and Kazakhmys (LSE: KAZ) followed, climbing 3%. Other notable risers included consumer goods company Reckitt Benckiser (LSE: RB) with a 2.5% gain and turbine manufacturer Rolls Royce (LSE: RR) and oil and gas producer BG Group (LSE: BG), which both tacked on 2%.
Just five FTSE 100 constituents lost more than 1%. Publisher Reed Elsevier (LSE: REL) declined 1.5%, while insurance focused investor Resolution (LSE: RSL), United Utilities (LSE: UU), telecom group BT (LSE: BT.A) and publisher Pearson (LSE: PSON) added slightly more than 1%.
In the US, the Dow Jones Industrial Average advanced 0.8% and the broader S&P 500 index added 0.7%, as did the technology focused NASDAQ composite. Financial bookmakers are currently projecting the US indices to reverse gains in today’s session after rising for three straight days.
Asian markets were sharply lower today. Hong Kong’s Hang Seng tumbled 2.4%, South Korea’s KOSPI was down 1.7%, Australia’s S&P/ASX 200 dropped 0.4% and Japan’s benchmark Nikkei 225 slid 2%. Chinese markets were closed for the Lunar New Year.
Oil prices retreated after rallying yesterday. April Brent Crude slid to US$76.70/barrel, while US light, sweet crude slipped below US$78/barrel.
Precious metals were sharply lower as US dollar strengthened on the Fed’s announcement. Gold fell back to US$1,100/oz, while silver and platinum were down to US$15.79/oz and US$1,502/oz respectively.
Base metals followed as copper and nickel fell to US$3.24/lb and US$9.09/lb. Zinc declined to US$1.02/lb.
Disclosure: The author holds no positions in the company