- FTSE 100 down 6 points
- Hargreaves Lansdown (LON:HRGV) falls as it goes ex-div
- JD Sports Fashion disappoints
10am: Japan acts to support yen
Japan has moved in the currency markets to support the yen against the strong dollar.
Vice finance minister for international affairs Masato Kanda said: "We have taken a decisive action (in the currency market)."
The US currency remains a haven in times of uncertainty, and had also been supported by the latest interest rate rise and hawkish Federal Reserve comments.
Japan has intervened about 5-6 times in the last 20+ years to counter a strong yen. Today's operation was the first time though since 1998 aimed at doing the opposite: countering a weak currency— David Ingles (@DavidInglesTV) September 22, 2022
Michael Hewson at CMC Markets UK said: "The Bank of Japan has intervened in the currency markets this morning, only this time rather than rate-checking the USD/JPY rate they actively intervened by selling US dollars for the first time since 1998.
"Today’s move came only hours after the central bank left its own monetary policy unchanged in the face of a rising inflation rate, albeit at a much lower rate of 3%.
"The failure to show any active sign that it was going to alter its monetary policy settings was taken as a green light by traders to push the US dollar to a new 24 year high above the 145.00 level, to a new peak of 145.90...
"This morning’s aggressive action certainly appears to have caught the markets unawares, sending the US dollar sharply lower.
"The big question is whether it will make a difference and change the long-term direction of the Japanese yen’s decline."
9.42am: Investors await Bank of England decision
More central bank decisions.
Norway's Norges Bank has raised rates by 50 basis points to 2.25%, while the Swiss National Bank has followed the Federal Reserve's lead with a 75 basis point increase to 0.5%, ending a period of negative rates
Ahead of the Bank of England's own decision, Neil Wilson at Markets.com said: "Markets anticipate the Monetary Policy Committee will vote to raise rates by 50bps to 2.25%, but there is a strong chance they choose to go bigger, particularly in the wake of the recent moves by the Fed and European Central Bank.
"The BoE is in an invidious position but it has to take the Fed’s lead and be prepared to inflict pain; compared with persistently high inflation, a short-term recession is the lesser of two evils. Markets are now pricing rates at 5% by September next year and I fail to see how the BoE can stop until inflation regains its anchors. Gradualism is being replaced with a more forceful attitude to tightening monetary policy. It’s important too that the BoE acts with sterling in mind."
The pound has recovered a little against the dollar after falling to a new 37 year low, and is now up 0.7309% at US$1.1336.
Meanwhile the yield on UK two year gilts has risen to 3.4%, the highest level since autumn 2008, as investors sell government bonds amid recession fears.
As for the FTSE 100, it is continuing its revival and is now down just 6.37 points at 7231.27.
8.52am: Footsie recovers some ground but still in the red
The selling has eased a little but the leading index is still firmly in the red.
The FTSE 100 is currently down 36.51 points or 0.5% at 7201.13.
European markets are also heading lower in the wake of the hawkish comments from the US Federal Reserve. Germany's Dax is down just over 1% while France's Cac is off 1.17%.
Back in the UK, Hargreaves Lansdown PLC (LSE:HL.) is the biggest faller in the blue chip index, down 5.03% as its shares went ex-dividend.
JD Sports Fashion PLC has dropped 3.96% after it reported lower half year profits, down from £364.6mln to £298.3mln.
And hotel groups are out of favour, with Intercontinental Hotels Group PLC (LON:IHG) 2.94% lower and Premier Inn owner Whitbread PLC (LON:WTB) falling 2.73%.
8.11am: Shares fall and pound under pressure
Leading shares have slumped in the wake of Wall Street's falls following the hawkish Federal Reserve comments and ahead of the Bank of England's own rate decision at midday.
Many expect a 75 basis point rise from the Bank but Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said it could opt for 50: "Yes, increased spending from Liz Truss government is no good for inflation, but, because the [announced] £40 billion energy package aims to tame inflation – and it certainly will, the BoE could take it easy on the rate front."
Even so this will take rates to their highest level since November 2008 amid the financial crisis.
The monetary policy committee will also have to take into account the mini-budget tomorrow which is expected to unveil hefty spending plans, including tax cuts.
Ozkardeskaya said: "The BoE is also expected to announce quantitative tightening, but the effect of QT will certainly remain under the shadow of huge sums that Truss government is preparing to spend. On top of the energy spending, there could be a £30 billion tax cuts, and also a stamp duty cut. It is said that the Chancellor of Exchequer will certainly need a bigger box to finance all that.
"What does it mean for the markets? It means that the UK gilts will probably further dive, and the sterling will end up hitting parity against the US dollar."
The Bank has at least had the chance to digest the Fed's comments - originally the UK central bank was due to announce last week before its US counterpart, but the meeting was postponed due to the period of mourning for the Queen's death.
As well as the focus on central banks, there also continue to be jitters following the aggressive comments from Russian president Putin and the mobilisation of troops he announced.
So the FTSE 100 is down 69.97 points or 0.97% to 7167.67 in early trading, more than wiping out Wednesday's gains.
And on the currency markets the pound fell as low as US$1.1212 this morning but has recovered a little to US$1.122, still down 0.299% and a new 37 year low.
7.00am: FTSE set for hefty losses at the open
The FTSE 100 is expected to open sharply lower following heavy falls in the US after the Federal Reserve slashed economic growth forecasts as it raised interest rates by 75 basis points once again.
Investors will be looking to see if the Bank of England follows a similar path today when it makes its interest rate announcement, with markets expecting at least 50 basis points with 75 a distinct possibility, the biggest rise for 33 years.
Spread betting companies are calling London’s blue-chip index down by 60 points.
US markets ended a see-saw final couple of hours sharply lower as the Federal Reserve signalled that interest rates would stay higher, for longer, and slashed its forecasts for economic growth for the next two years.
The rate increase of 75bp was as expected but it was the accompanying hawkish remarks and estimates that further spooked the markets.
At the close, the Dow Jones was down 523 points, or 1.7%, at 30,184, the S&P 500 shed 66 points, or 1.7%, to 3,790, and the Nasdaq Composite tumbled 205 points, or 1.8%, to 11,200.
Michael Hewson, chief market analyst at CMC Markets UK, said: "Fed chair Jay Powell [said] that the FOMC were “strongly committed” to driving inflation lower while signalling that more rate rises are on the way. Powell went on to say that there was no painless way to drive inflation lower, with the prospect that we could well see another 100bps by the end of this year at the bare minimum.
"Not surprisingly US equity markets did not like the hawkish tone, as well as the prospect of lower growth and higher inflation, with the Fed altering its guidance on both. US GDP is expected to slow to 0.2% in 2022, with Powell admitting that a recession might be possible. Core inflation is forecast to decline to 4.5% this year, before falling to 2.1% by 2025."