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Wall Street flat but FTSE 100 closes in the green ahead of Powell speech

FTSE  Traders work on the floor at the New York Stock Exchange as the Federal Reserve chairman Jerome Powell speaks after announcing a rate increase in New York, Wednesday, Nov. 2, 2022. (AP Photo/Seth Wenig)
Wall Street and the FTSE 100 await a speech on the economy from Federal Reserve Chair Jerome Powell. Photo: Seth Wenig/AP

The FTSE 100 and European stocks managed to make gains this session, as inflation across the single currency block dropped to 10% in the year to November and investors await a speech from Fed chair Jerome Powell.

The FTSE 100 (^FTSE) rose 1.06% to close at 7,591, while the CAC (^FCHI) in Paris advanced 0.86% to 6,726 points. In Germany, the DAX (^GDAXI) gained 0.16% to 14,378.

“In terms of global performance, the FTSE 100 continues to punch above its weight, as investors seek the cover of an established index driven largely by mature companies with an element of defensiveness. The strength of the US dollar has improved earnings numbers on repatriation, there is an average dividend yield of 3.7% and some overseas buying interest has left the premier index ahead by 2.3% in the year to date. In early exchanges, broker upgrades lifted the likes of Melrose (MRO.L), Rolls-Royce (RR.L) and BAE Systems (BA.L),” Richard Hunter, head of markets at Interactive Investor, said.

Read more: Food prices up over 12% in November as consumers face a bleak winter

“The same cannot be said of the FTSE 250, however, where a decline of 18% so far this year is a reflection of the parlous state of the UK economy at present. This index has failed to capture the attention of investors, given its domestic focus, with any immediate positive catalysts few and far between,” he added.

Luxury handbag maker Mulberry (MUL.L) swung to a half-year loss as it revealed sales plunged by 10% across the UK as the economic uncertainty and cost-of-living crisis knocked shopper confidence. Shares were down 10%.

On Wall Street, stocks were mostly flat as traders awaited the US Federal Reserve chair's speech on the outlook for the US economy and the labour market.

Read more: Bank of England blindsided by ‘extraordinary’ mini-budget, Andrew Bailey says

Hargreaves Lansdown senior analyst Susannah Streeter said: “Although super-sized rate hikes appear to be in the rear-view mirror, an increase of 0.5% is still expected in December with the tightening cycle considered to be far from complete.

“The big worry among central bankers is that if economic pain isn’t inflicted now, inflation will be much harder to tame over the longer term.”

The Dow Jones (^DJI) lost 0.53% to 33,672. The S&P 500 (^GSPC) was down 0.18% at 3,950 points and the tech-heavy Nasdaq (^IXIC) climbed 0.20% to 11,006.

In Europe, euro area annual inflation fell to 10.0% in November, down from 10.6% in October according to a flash estimate from the Eurostat.

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With eurozone inflation lower than had been expected, attention has turned to what the European Central Bank will do about interest rates next month.

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Meanwhile, Brent crude (BZ=F) has climbed to $85/barrel, as analysts bid on hopes for a loosening of Chinese restrictions which could lead to renewed demand.

In Asia, Tokyo’s Nikkei 225 (^N225) slumped 0.21% to finish at 27,968 while the Hang Seng (^HSI) in Hong Kong gained 2.05% to 18,578. The Shanghai Composite (000001.SS) closed flat at 3,151 points.

Watch: What is a recession and how do we spot one?