London stocks closed in mixed territory on Wednesday, with concerns over US interest rates and a sharp fall in Associated British Foods (ABF.L) weighing heavily on the FTSE 100.
The FTSE 100 ended the session down 18.78 points, or 0.2%, closing at 10,478.34, as blue-chip shares struggled against a backdrop of global uncertainty.
The mid-cap index fared considerably better, with the FTSE 250 rising 316.62 points, or 1.4%, to finish at 23,330.07, while the AIM All-Share gained 0.5% to close at 776.05.
European markets were equally divided, with the CAC 40 in Paris falling 0.8% while the DAX 40 in Frankfurt edged up 0.2% by the close of trading.
Dan Coatsworth, head of markets at AJ Bell, said: “Stocks across Europe took a step back as investors continued to fret about the prospect of the Fed pushing up interest rates.”
Coatsworth noted that while expectations for a July rate hike had eased, “what’s troubling investors is the prospect of a rate hike at the end of the year,” adding further uncertainty to market sentiment.
New Federal Reserve chairman Kevin Warsh spoke at a European Central Bank forum in Portugal on Wednesday, sitting alongside the heads of the ECB, the Bank of England and the Bank of Canada.
“We’re going to deliver price stability in the US,” Warsh said, offering little clarity on the precise direction of interest rates in the months ahead.
He added: “That’s what this committee has signed up to do, and our objective is to do that,” referring to the Federal Open Market Committee, which sets US interest rates.
US bond yields reacted sharply, with the 10-year Treasury yield climbing to 4.47% from 4.40% on Tuesday, and the 30-year yield stretching to 4.97% from 4.89% the previous session.
Associated British Foods (ABF.L) was the biggest drag on the FTSE 100, falling 3.2% after reporting a continued decline in comparable sales at Primark and a worsening outlook for its sugar division.
Like-for-like sales at Primark dropped 2.2% in the third quarter, with UK and Ireland sales down 0.2% and European sales falling a more pronounced 3.6% over the same period.
AB Foods now expects its sugar business to deliver an adjusted operating loss of between £25 million and £60 million for the 2026 financial year, compared to a market consensus of a £22 million loss cited by Citigroup.
On Wall Street, shares of Meta Platforms surged 10% after Bloomberg reported the social media giant is developing plans to launch a cloud computing business selling AI computing power to outside customers.
The report indicated Meta intends to compete directly with Amazon Web Services, Microsoft Azure and Google Cloud by monetising the excess computing capacity it has accumulated while racing to develop artificial intelligence.
Defence manufacturer Babcock International was the standout gainer on the FTSE 100, rising 5.2%, while J Sainsbury added 3.4% following Tuesday’s well-received trading update.
Kathleen Brooks, research director at XTB, said: “The NFP report is expected to show 113,000 non-farm payrolls were created last month,” with traders watching closely for any signal on the Fed’s next move.
Advance data from payroll provider ADP showed US employment rose by 98,000 jobs in June, falling short of the 113,000 consensus forecast and slowing from an increase of 122,000 in May.
Brent crude for September delivery fell to 71.85 dollars a barrel on Wednesday, down from 73.04 dollars on Tuesday, as Iran and the US prepared to hold indirect talks in Doha via mediators.
Gold climbed to 4,080.66 dollars an ounce on Wednesday, up from 4,032.83 dollars on Tuesday, as investors sought safe-haven assets amid lingering geopolitical and monetary policy uncertainty.