Vodafone and GSK drag UK’s blue-chip index in early trading

The UK’s blue-chip index dipped on Wednesday, dragged by losses in Vodafone and GSK, while caution ahead of a Federal Reserve policy decision and weak China data weighed on the global mood.

The blue-chip FTSE 100 dipped 0.1%, with Vodafone falling 3.9% after French telecom operator Iliad said its British peer rejected a sweetened proposal to merge their Italian businesses.

Shares of GSK were down 1.2% even as the drugmaker beat market estimates for fourth-quarter results.

The midcap FTSE 250 shed 0.2%, with Harbour Energy falling 3.7% after Goldman Sachs downgraded the oil and gas producer’s shares to “sell” from “buy”.

Both the FTSE indexes are headed for their first monthly decline in three as investors scaled back bets of aggressive interest rate cuts from major central banks, with concerns about China’s slowing economy adding to the gloom.

A survey showed China’s manufacturing activity contracted for the fourth straight month in January.

The Fed is widely seen holding interest rates later in the day, with focus on Chair Jerome Powell’s post-meeting press conference and any hints on how soon the Fed could begin easing rates.

“The FOMC has a rather delicate balancing act on its hands, whereby it will want to make clear to markets that cuts are coming, albeit that a rate reduction as early as the March meeting is probably not on the cards,” said Matthew Ryan, head of market strategy at Ebury.

“At this stage, we don’t see a scenario where the Fed endorses a March move, particularly given the strength of the latest GDP and labour market data.”

The Bank of England is set to release its policy decision on Thursday. Traders are expecting no changes to the Bank rate but see the central bank starting to cut borrowing costs in June.

British house prices rose more than economists had expected in January, adding to signs that the squeeze from high interest rates is beginning to ease, figures from mortgage lender Nationwide Building Society showed. Reuters