London close: Stocks rise as Powell hints at policy shift

(Sharecast News) - London equities ended higher on Friday as investors assessed Federal Reserve chair Jerome Powell's speech at the Jackson Hole symposium for clues on the outlook for US interest rates. The FTSE 100 index rose 0.13% to close at 9,321.40, while the FTSE 250 outperformed with a 1.19% gain to 22,077.23.

"The FTSE 100 saw a subdued start on Friday after achieving a record close above 9,300 yesterday," said AJ Bell investment analyst Dan Coatsworth.

"This followed more selling on Wall Street overnight, albeit of moderate persuasion, as investors fret about the message Federal Reserve chair Jerome Powell might deliver at the Jackson Hole summit."

In currency markets, sterling strengthened 0.89% against the dollar to $1.3531 but slipped 0.1% versus the euro to trade at €1.1545.

Powell signals possible Fed policy shift, UK consumer confidence improves

Federal Reserve chair Jerome Powell signalled a potential shift in US monetary policy, suggesting that interest rate cuts could be on the table if economic conditions continue to soften.

Stephen Innes, managing partner at SPI Asset Management, said the backdrop had shifted dramatically in recent weeks.

"Markets had been begging for a clean glide path to cuts. July's payroll stumble, coupled with those brutal downward revisions to May and June, had futures traders sprinting headlong into the fantasy of a jumbo September slash.

"But just as the doves were stretching their wings, the PPI came in hot - the fiercest surge in three years - and torched the narrative.

"Inflation ghosts aren't just alive, they're rattling the rafters."

Powell highlighted growing risks in the labour market, noting that while unemployment remains low, slowing job growth could quickly reverse if conditions worsen.

"This unusual situation suggests that downside risks to employment are rising," he said.

"And if those risks materialise, they can do so quickly in the form of sharply higher layoffs and rising unemployment."

Innes added that Powell now faced a market braced for disappointment.

"What was once near-certainty is now merely probability.

September odds have been trimmed from 92% to the low-70s - still elevated, but no longer a one-way bet.

"That leaves Powell boxed in, staring down a market that has already pre-doved the path and now demands he out-dove the curve just to keep risk assets from wobbling."

Powell also played down fears that Donald Trump's recently announced "reciprocal" tariffs would meaningfully stoke inflation, saying they were likely to have only a modest impact on consumer prices.

With monetary policy still in restrictive territory, he added that "the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," reinforcing expectations that the Fed is preparing to ease if the economy weakens further.

On home shores, UK consumer confidence improved in August as lower interest rates boosted optimism about personal finances.

GfK's monthly index rose two points to -17, its highest level this year, with measures of both past and future financial sentiment climbing three points each.

"A slight uptick in consumer confidence in the UK is good news for retailers, hospitality and travel businesses," said Coatsworth, "but no-one will be getting carried away given this is just a case of people feeling a bit less bad rather than genuinely optimistic about the economic outlook."

Standard Chartered climbs, miners reverse losses

On London's equity markets, Standard Chartered climbed 4.19% after the bank welcomed what it called a favourable filing from the US Department of Justice in a long-running civil case over alleged sanctions breaches.

The bank said the DoJ's latest position in the so-called "Brutus" case confirmed the claims, first brought by a former employee and his associates more than a decade ago, were "false" and had been repeatedly dismissed by US courts.

Morgan Advanced Materials rose 3.62% after agreeing to sell its Molten Metal Systems business to Vesuvius for £92.7m, while housebuilders Berkeley Group and Persimmon gained 2.16% and 2.31%, respectively, recovering some ground after earlier losses this week following a hotter-than-expected UK inflation reading.

Elsewhere, Blackstone secured victory in the battle to acquire Warehouse REIT after rival bidder Tritax Big Box REIT said it would not raise its offer.

Warehouse REIT slipped 0.35%, while Tritax Big Box rose 2.59% after confirming it would not pursue a higher bid.

Heavily weighted miners reversed earlier losses to finish higher, with Anglo American up 0.92%, Antofagasta gaining 1.45%, and Glencore advancing 0.67%.

Elsewheer, Coatsworth said the latest update from Revolution Beauty was hard to spin positively:

"It is not easy to put a positive gloss on Revolution Beauty's latest update.

"The fact the company is no longer up for sale because it couldn't get a successful offer means shareholders no longer have the prospect of an immediate exit and must now hope this last-ditch effort can revive its fortunes," he said.

Frasers' decision to pull out of the formal sale process in June complicated matters further, with Debenhams - which owns 29% of Revolution Beauty - now backing the company's turnaround efforts.

"Trying to find positives in the situation is like putting lipstick on a pig," Coatsworth added, "but the shares are up slightly today on the fundraise news and the return of co-founder Tom Allsworth as CEO.

"However, these initiatives will need to work quickly if Revolution Beauty is truly to become a viable business for the long term."

Meanwhile, WH Smith rebounded 11.09%, clawing back some of Thursday's sharp losses after the retailer cut its profit outlook due to a £30m accounting overstatement in its North America division.

The company said Deloitte would conduct an independent review and promised a further update with its preliminary results.

Reporting by Josh White for Sharecast.com.