The FTSE 100 reversed early gains to close slightly lower on Wednesday after fresh political uncertainty from the US sent global markets into a panic late in the session..
London’s blue-chip index finished down 0.1% at 8,926.55, having earlier shrugged off hotter-than-expected UK inflation data. The FTSE 250 underperformed, falling 0.4% to 21,601.86, while the AIM All-Share edged up 0.1% to 772.10.
Sentiment turned sour after a Bloomberg report^ claimed President Donald Trump is likely to fire Federal Reserve Chair Jerome Powell soon. Citing sources, Bloomberg said Trump raised the possibility during a private meeting with congressional Republicans on Tuesday night.
The news erased earlier equity gains on both sides of the Atlantic, with Wall Street slipping into the red. The Dow Jones was down 0.3% near London’s close, matching losses in the S&P 500, while the Nasdaq dropped 0.4%.
Trump has long criticised Powell over interest rate policy, pushing for more aggressive cuts to boost the US economy. Speculation around Powell’s job security stoked investor nerves, even after benign producer price inflation data suggested less immediate pressure on prices.
Markets reversed shortly after panic selling, as Trump denied reports he intended to fire Powell.
US producer price inflation rose 2.3% year-on-year in June, slowing from May’s 2.7% and coming in softer than the expected 2.5%. Monthly prices were flat, defying forecasts for a modest rise.
In the FTSE 100, Intermediate Capital Group was higher 3.4% after the private equity investor reported a 9% quarterly rise in assets under management to $122.6 billion.
Insurer Hiscox gained 2.6% after Morgan Stanley upgraded the stock to ‘overweight’. Diageo edged up 0.6% despite CEO Debra Crew stepping down with immediate effect. CFO Nik Jhangiani will take over on an interim basis while a full search is conducted.
Meanwhile, Hays fell 1.5% after a downgrade to ‘underweight’ from Morgan Stanley, and Goldman Sachs, Morgan Stanley and Bank of America shares declined in New York despite record trading profits.