London markets plunge after Fed indicates fewer rates cuts in 2025 than forecast
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The FTSE 100 tumbled on Thursday, following a sharp sell-off on Wall Street triggered by the latest US interest rate cut. London traders followed suit, with top equities falling amid caution ahead of the UK’s own crucial interest rate decision. The Bank of England policymakers are anticipated to maintain interest rates at 4.75% after their recent Monetary Policy Committee meeting.
As a result, the pound increased in value, while the dollar faced pressure following the US cut. Sterling was up 0.57% at 1.263 against the US dollar just before the midday interest rate decision. The strength of the pound added more pressure on major London-listed firms. The FTSE 100 fell 112 points, or 1.37%, to 8,087.11, bringing the index to its lowest in nearly a month. Lenders and housing firms were among the biggest fallers as they processed the US rate cut and predicted a hold for UK interest rates.
The weakness in London followed a significant drop in the main US market during Wednesday's trading. This slump was ignited by the US Federal Reserve, which reduced interest rates by another 0.25 percentage points – but also indicated it will cut rates fewer times next year than previously forecasted.
The Dow Jones dropped by 2.6% for the session, marking its 10th consecutive day of losses. The S&P 500 meanwhile fell by around 3%. Russ Mould, investment director at AJ Bell, commented: "Markets are normally good at reading the signs, but the sell-off on Wall Street last night would suggest investors had started on the Christmas sherry a bit early and were caught out by the Fed’s announcement about where rates might go in 2025.".
