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FTSE 100 Live: US rates to jump, oil price higher on EU sanctions

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Oil price up 2.5%, Admiral and Direct Line shares skid

Brent crude futures are 2.5% higher at $107.66 a barrel as traders react to European moves to ban Russian oil over the next six months and refined fuels by the end of 2022.

The latest sanctions proposed this morning by European Commission president Ursula von der Leyen have added to the industry’s wider supply concerns following figures yesterday showing a surprise drawdown in US inventories.

BP and Shell shares rose 0.5% following Brent’s rise but the FTSE 100 index weakened 22.64 points to 7538.69 in lacklustre trading ahead of tonight’s US Federal Reserve announcement.

Gambling business Flutter Entertainment was the biggest riser, lifting 4% or 360p to 8650p as the Paddy Power owner reported a strong first three months of the year for its US business FanDuel. Shares in rival Entain were boosted 43p to 1535p.

Car insurer Admiral was at the top of fallers board after rival Direct Line Insurance said its motor new business premiums increased by mid-single digits early in January and were flat through the rest of the quarter.

It added: “Across the market, we do not believe this adequately covers the level of claims inflation experienced over the last 18 months.”

Direct Line shares fell 7% or 17.5p to 238p in the FTSE 250 and Admiral dropped 5% or 118p to 2443p.

The FTSE 250 index eased 93.54 points to 20,427.22, although Aston Martin Lagonda shares rose 3% or 26.8p to 872.4p after its first quarter results and change of chief executive.

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New boss at Aston Martin, Q1 loss jumps

Aston Martin Lagonda chief executive Tobias Moers is leaving with immediate effect, to be replaced by ex-Ferrari boss Amedeo Felisa.

Canadian billionaire Lawrence Stroll, who is the company’s executive chairman and a major shareholder, said: “Now, there is a need for the business to enter a new phase of growth with a new leadership team and structure to ensure we deliver on our goals.”

He said Felisa, who is already a non-executive director at Aston Martin, had an “excellent track record” and previous experience of leading a major ultra-luxury car manufacturer. Stroll added: “His technical acumen and charisma will be inspirational for the entire company.”

The replacement of Moers after two years in the role came as Aston Martin stuck by 2022 guidance despite a big rise in its first quarter operating loss to £47.7 million.

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More big US rate rises to come

Today’s rate rise will be the first time the Federal Reserve has hiked at consecutive meetings since 2006.

Deutsche Bank sees chairman Jerome Powell affirming market pricing that further half point rate hikes are ahead.

The bank’s US economists believe this will be the first of three consecutive half percentage point moves, which will eventually take the Fed fund rates to a peak of 3.6% in mid-2023.

They also expect an announcement that balance sheet rundown will begin in June, with a cap of $60 billion a month for Treasuries and $35 billion for mortgage backed securities.

Deutsche Bank commentator Jim Reid added today: “While the Fed might have already begun their hiking cycle seven weeks ago, the sense that they’re behind the curve has only grown over that time.”

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Focus on Fed rates decision, Wall Street steady

Stock markets are trading sideways ahead of tonight’s Federal Reserve decision, when policymakers are expected to increase interest rates by half a percentage point.

Despite this being the largest rise in over two decades, the main focus for investors will be the Fed’s guidance on the path for interest rate hikes over the rest of the year.

Wall Street is pricing an end-of-year level of near to 2.5% as another half point increase is expected at the Fed’s next gathering before further rises at subsequent meetings as policymakers battle to bring inflation back under control.

Tight labour market conditions, which risk inducing a wage-price spiral and more persistent inflation, continue to be a concern after figures yesterday showed the number of job openings in the US rose by a bigger-than-expected 205,000 to a new high.

Oil-driven inflationary pressures also remain after Brent crude futures rose 1% to $106 a barrel on supply concerns created by a surprise drawdown in US inventories. The prospect of fresh EU sanctions targeting Russia’s oil industry added to the pressure.

The Federal Reserve decision is at 7pm, followed by a press conference with chairman Jerome Powell 30 minutes later.

Until then, investors appear content to sit on the sidelines after Wall Street indices traded moderately higher on Tuesday and are set for a flat session today. It’s a similar story in Europe, with the FTSE 100 index forecast to open unchanged at 7561.

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