Investors await Fed decision, GSK and AstraZeneca weigh on FTSE 100
Early trading has seen the FTSE 100 slip lower, with global markets remaining cautious despite news that the US and China would meet this week.
Indices cautious as Federal Reserve's decision looms
News that the US and China would soon start talks in Switzerland failed to provide much of a boost for stock markets in early trading on Wednesday. Nor did news that China had cut interest rates, and also reduced the amount of money banks need to hold, in order to provide support for the economy.
Stock markets seem fatigued after the huge gains made since April’s low almost a month ago. In the immediate aftermath of President Trump’s tariff announcements investors seemed to fear that a complete breakdown of the global economy was upon us. Of course, it is too soon to assess the impact of tariffs, and with ordinary investors still happy to snap up bargains we have seen a huge rebound.
The big question is what comes next. In the short-term, investors are looking out anxiously for any data that suggests the US and global economies are beginning to deteriorate. Should such news fail to appear for the time being, then perhaps further gains are likely at least in the short term.
Today’s Federal Reserve (Fed) decision has provided investors with a good excuse to sit on their hands. The US central bank is not expected to change policy, but its comments will be scrutinised closely for hints about changes at the next meeting in June.
FTSE 100 dragged down by pharmaceuticals
Pharma giants GlaxoSmithKline (GSK) and AstraZeneca fell into the red today after the appointment of a US official who is viewed as being more likely to require more stringent criteria for approving new medicines. As the largest market for new medicines, such moves in the US could make drug development more expensive, while slowing down the approval of new drugs, hurting earnings for global pharmaceutical names.
Also on the back foot in early trading was BT, which fell after Deutsche Bank cut its rating to a ‘sell’ from a ‘hold’.
Pub group JD Wetherspoon managed to report an improvement in like-for-like sales for the year so far, though with the shares already up 27% over the last month the impact was muted.
What to watch today
The Fed decision at 7pm will be the key event of the day, even if no change in policy is expected. US futures remain muted ahead of this, after a lacklustre day yesterday that saw sentiment under pressure following Palantir’s earnings on Monday.
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