Stocks get a boost ahead of the Fed meeting after a poor start to the week.

London stocks were still firmly in the black by midday on Wednesday, underpinned by strength in the mining and energy sectors, as investors eyed the latest policy announcement from the US Federal Reserve.

In equity markets, heavily weighted miners were among the top performers as copper prices rose, with Antofagasta, Anglo American and Glencore all up. Rio Tinto was also in focus after it reported a 1.8% jump in first-half profit.

Oil giants BP and Shell gushed higher as oil prices pushed up amid escalating tensions in the Middle East.

HSBC was the standout gainer on the FTSE 100 as it said it would start a $3bn share buyback after the Asia-focused bank reported estimate-busting interim profits in its final set of results under chief executive Noel Quinn. Pre-tax profits surged to $8.9bn from $8.8bn a year earlier and smashed analysts’ forecasts of $7.8bn.

Quinn, who has been CEO for five years, will be succeeded by finance chief Georges Elhedery.

The bank announced that financial controller Jon Bingham would take on the chief financial officer role on an interim basis.

Taylor Wimpey was up as the housebuilder said profits fell by more than a fifth in the first half as residual build cost inflation and weaker pricing hit margins, but that it now expects full-year completions to be at the top end of guidance after a solid operational performance.

Just Eat surged after backing its guidance for 2024 as it posted a more than 40% increase in first-half core profit and announced a new €150m share buyback programme.

Rathbones reported a jump in first-half profit and funds under management as it said it was ahead of its objectives following a merger with Investec Wealth & Investment.

On the downside, GSK fell despite raising annual forecasts after better-than-expected second-quarter results, driven by a strong performance from its cancer and HIV treatments.

In the US stocks staged a rebound amid a rally in beaten-down chipmakers, with the latest economic data bolstering bets the Federal Reserve will signal a rate cut in September.

Equities saw solid gains as Nvidia Corp. surged 10% after being renamed the top US chip stock pick by Morgan Stanley analysts. Advanced Micro Devices jumped on a bullish outlook. The US Treasury left its quarterly issuance of longer-term debt unchanged for the second time in a row and maintained its guidance that it doesn’t expect to need increasing issuance of notes and bonds for “several quarters.”

A broad gauge of US labour cost growth closely watched by the Fed cooled in the second quarter by more than forecast. American companies added the fewest number of workers since the start of the year and wage growth slowed. Separately, pending home sales rose for the first time in three months.

Fed officials are likely to move closer to lowering rates from a two-decade high by signalling a potential rate cut in September, though they may stop short of providing details beyond that. The decision will be announced via a post-meeting statement at 2 pm in Washington.

As Meta Platforms gets ready to report earnings, investors will be hoping it can do a better job than Microsoft and Alphabet in convincing Wall Street that lofty spending on AI will be worth it. Mastercard soared on a profit beat. Boeing gained after appointing a new chief.

Treasury 10-year yields declined four basis points to 4.09%. The Dollar Spot Index fell 0.6%.

In commodities oil jumped after Hamas said Israel killed its political leader, stoking geopolitical risks. WTI was up over 3% around lunchtime and Brent Crude was not far behind with a 2.3% increase. European and UK gas were also higher at 2.08% and 1.88% respectively.

The road ahead for investors is looking rough right now as policy gatherings by the world’s most important central banks come at the start of what’s historically the worst two months for US stock returns.

In the past three decades, the S&P 500 Index in August and September has averaged respective losses of 0.5% and 0.7%, data compiled by Bloomberg show.

Now though, it’s all eyes on the Fed meeting later today. The Fed’s policy making body will publish a statement and interest-rate decision at 2 pm eastern time. Fed Chair Jerome Powell will deliver remarks and answer questions at a news conference half an hour later.

The FOMC has held the federal funds rate target at a range of 5.25% to 5.5% since July 2023. Now, decelerating inflation and a normalizing labour market have officials looking to thread the needle and deliver a rare soft landing for the US economy.

The committee next meets on September 17-18, which is when investors are anticipating a change. What policymakers and Powell say about September will determine markets’ reaction on Wednesday.

According to interest-rate futures market pricing, the odds of a quarter-point rate cut in September sit at roughly 88%, while markets see a 12% chance of a half-point cut. Bond yields have come down significantly since the spring, as those rate-cut probabilities have climbed.

The FOMC’s post-meeting policy statement on Wednesday will be critical to watch, as it could include wording tweaks that signal a September interest-rate cut is in the cards. Fed watchers and investors will also be paying close attention to Powell’s news conference for further confirmation—or for clues into the committee’s thinking about what could come after a first rate cut.

Following on from the FOMC today, we will then get an interest rate decision from the Bank of England tomorrow. Inflation in the UK is lower than that of the US and a rate cut is absolutely imminent. Whether it’s tomorrow or next month remains to be seen, but it will be soon.

The UK economy is doing well and data suggests costs are easing; wages are following suit and gradual rate cuts should now be implemented.

We will report later in the week about the rate decisions and how they affected markets.

Enjoy the rest of the week in the markets.

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