London stocks opened on a positive note on Wednesday, buoyed by a decline in oil prices that offered some respite to unsettled global markets. However, investor attention remained firmly fixed on the U.S. Federal Reserve's upcoming interest rate decision, expected later in the day. Meanwhile, the Middle East crisis, now in its third week, showed no signs of de-escalation. Hostilities intensified as Israel and Iran escalated attacks following the death of Tehran's security chief. Despite the geopolitical unrest, oil prices eased slightly as Iraq resumed exports via the Ceyhan pipeline, providing a brief reprieve for energy markets. Later in the afternoon, Iranian warnings targeting broader energy infrastructure sent oil prices climbing again, dampening investor sentiment and dragging global markets lower. The FTSE, which had earlier traded in positive territory, reversed course to trade in negative territory on the session. The aerospace and defence sectors performed strongly, rising 2%, while the financial sector followed closely with a 1.9% gain, leading the day’s top performers. In contrast, the energy sector retreated by 0.6% after reaching record highs on Tuesday. Ithaca Energy suffered a significant blow, plunging 5.2% after reporting an annual net loss. On the stock market front, Diploma surged an impressive 18.2%, hitting a record high after the technical products and services distributor raised its fiscal year 2026 outlook. At the same time, IT solutions provider Softcat saw its shares jump 8.9%, fuelled by an upgraded annual profit forecast.
Across the Atlantic, all eyes were on the Federal Reserve, with markets largely expecting no changes to interest rates. Investors eagerly awaited any signals regarding the Fed’s future monetary policy direction. Meanwhile, in the UK, government borrowing costs eased to their lowest levels in a week. However, persistent inflation concerns and uncertainty surrounding potential Bank of England (BoE) rate cuts have kept borrowing costs elevated compared to pre-conflict levels. A recent Reuters poll indicated a shift in economists’ expectations, with many abandoning predictions of a BoE rate cut in March. Instead, they now anticipate a modest 25-basis-point reduction in either April or June. Despite recent energy market developments, markets expect just one 25-basis-point cut to the BoE's policy rate by the end of this year. They are downplaying concerns about a potential BoE rate hike, noting that central banks often "look through" temporary energy price shocks. The Bank of England is expected to hold the bank rate steady at 3.75% during tomorrow's Monetary Policy Committee meeting, keeping markets on edge for further developments.
TECHNICAL & TRADE VIEW - FTSE100
Daily VWAP Bullish
Weekly VWAP Bullish
Below 10600 Target 10100
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