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Precious metals stocks hit by rate rise

Precious metals

The FTSE 100 opened with little fanfare as it drifted 7 points lower to 6,942.46 in the wake of the US Federal Reserve’s well-flagged decision to raise base rates by a quarter of a percentage point.

The precious metal miners were the morning’s major casualties, tracking the price of gold lower following the Fed hike.

Mexico-focused Fresnillo (LON:FRES) tumbled 8%, followed by Randgold (LON:RRS) and Polymetal (LON:POLY).

Top of the leader board was Centrica (LON:CNA), buoyed by a stronger than expected trading statement.

The bank stocks were also in demand as the threat posed by the wobbly Italian financial sector receded.

FTSE 100 is called to start lower on Thursday after the Fed raised interest rates overnight, as had been expected.

The US Central bank however caught some off guard by saying there would likely be a further three interest rate rises to come next year in 2017.

It was the first of the Fed’s monetary policy committee meetings since Donald Trump became president in November, which has seen a stock market rally based on his promises to increase infrastructure investment and lower business tax.

Janet Yellen, Fed chair raised the rate 0.25% from 0.50 to 0.75%.

In London, FTSE 100 closed down 0.28% to 6,949 and the index is today called by spreadbetters to lose a further 19 points.

In Europe, stocks markets were also down, while the Dow Jones on Wall Street finished 0.6% down at 19,792, the Nasdaq ended 0.5% down and the S&P500 lost 18, at 2,253.

With an hour of trading to go, the Nikkei 225 added 0.10% to 19,273 and the Shanghai Composite Index lost 1.18% to 3,103.

In London, today focus will be on the Bank of England and its take on interest rates.

Michael Heson, at CMC Markets, said its final Bank of England meeting of 2016 is likely to see them stick at ‘hold’ with the prospect that further rate cuts are off the table for the foreseeable future.

“If anything we might see the Monetary Policy Committee adopt a slightly less dovish tone, in an attempt to keep that floor under the pound that has been in place since the flash crash lows in October. The MPC will also have concerns over the prospect of higher inflation, given the moves higher in import prices that we’ve seen in the past few weeks, which has been reflected in sharply higher gilt yields.”

Paul

The author Paul