London Stocks Rally Amid Lower Oil Prices and US Rate Hike

The FTSE 100 index closed up 0.3% at 10,688.47 on Wednesday as stocks in London rallied despite higher inflation and an expected US rate increase. The oil price fall provided some 'much-needed relief' to the market, according to Russ Mould, investment director at AJ Bell.

The dip in the commodity price might not be enough to steer the Federal Reserve on a different path, though. Analysts at UBS said the decision represents a major policy test for Federal Reserve chairman Kevin Warsh, including his ability to build consensus and manage market expectations around the degree of guidance provided on the interest rate path ahead.

The US Federal Reserve is expected to raise interest rates today, with a quarter-point rate increase widely forecast. Bond yields eased back from recent highs, with the yield on the US 10-year Treasury quoted at 4.97% and the yield on the US 30-year Treasury at 5.34%. The pound was down against both the dollar and euro.