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Wall Street slides and FTSE closes in the red as Fed meeting gets underway

A look at how the major markets are performing on Tuesday

FTSE U.S. Federal Reserve Board Chair Jerome Powell arrives for a news conference after the Fed raised interest rates by a quarter of a percentage point following a two-day meeting of the Federal Open Market Committee (FOMC) on interest rate policy in Washington, U.S., March 22, 2023. REUTERS/Leah Millis
The Federal Reserve is expected to raise rates by a quarter point. The FTSE closed in the red. Photo: Leah Millis/Reuters (Leah Millis / reuters)

The FTSE and European stocks closed lower lower this Tuesday as investors positioned themselves for the Federal Reserve’s May two-day policy meeting, with an interest rate decision due on Wednesday

The FTSE 100 (^FTSE) lost 1.10% to close at 7,784 points, while the CAC 40 (^FCHI) in Paris tumbled 1.47% to 7,381 points. In Germany, the DAX (^GDAXI) lost 1.25% to 15,723.

On Wall Street, the Dow Jones (^DJI) lost 1.57% to 33,518 points. The S&P 500 (^GSPC) tumbled 1.61% to 4,100 points and the tech-heavy NASDAQ (^IXIC) fell 1.33% to 12,050.

Shares in two regional US banks have been paused amid fresh concerns about the health of the financial sector in the wake of the rescue of First Republic.

FTSE 100

The UK’s blue chip index was boosted by a 5% jump in shares of HSBC (HSBA.L) after the lender's quarterly profit tripled, but overall gains were erased by weakness in energy stocks.

BP (BP.L) tumbled 8.61% after the oil major pared back its share buyback programme.

Housebuilders received a boost from Nationwide data showing a monthly increase in house prices for the first time in seven months.

Read more: BP profits hit £4bn in three months as UK households struggle with energy bills

Persimmon (PSN.L) surged 5.29%, Barratt Developments (BDEV.L) climbed 1.24% and Taylor Wimpey (TW.L) rose 0.62%.

US and Asia

US stocks fell on Tuesday as the Federal Reserve began its two-day meeting to determine the direction of interest rates in its battle against inflation.

The Federal Reserve is expected to raise rates by a quarter point. Investors' main focus will be on whether Fed officials will give any hints on forward guidance.

Meanwhile, regulators seized First Republic early on Monday and sold most of the bank's operations to JPMorgan in the largest bank failure since the 2008 financial crisis.

JPMorgan Chase CEO Jamie Dimon said that the seizure of First Republic puts to rest a period of panic over the banking system.

"This part of the crisis is over," he told analysts on a Monday conference call.

A number of banks, including JPMorgan and PNC, had submitted bids on Sunday to the Federal Deposit Insurance Corporation to acquire the embattled bank.

Read more: UK house prices rebound in April after seven month decline

However, the crisis doesn't seem to be over as PacWest Bancorp (PACW) and Western Alliance Bancorp (WAL) both "paused" trading in their shares this Tuesday after plunging as much as 36% and 21% respectively to lead a rout in shares of regional banks stocks.

In Asia, markets were higher on Tuesday as most bourses returned after the long Labour Day weekend.

Tokyo’s Nikkei 225 (^N225) gained 0.12% to 29,157 points, while the Hang Seng (^HSI) in Hong Kong rose 0.37% to 19,986. The Shanghai Composite (000001.SS) was closed for a holiday Tuesday.

Pound

The pound’s (GBPUSD=X) rally against the dollar stalled on Tuesday, with sterling trading at $1.2485.

Sterling (GBPEUR=X) also lost ground against the euro to trade at €1.1368.

Oil

Meanwhile, Brent crude (BZ=F) lost ground and was trading at around $76 per barrel amid fears of a slowdown in China’s recovery.

Watch: JPMorgan Chase taking over First Republic Bank in 2nd largest bank failure in US history

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