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London market edges into positive territory despite investors' caution over Brexit and US rate hike

A security guard looks on as Geert Wilders, left, cast his ballot for the Dutch general election in The Hague, Netherlands, yesterday PICTURE: Peter Dejong/AP

THE London market edged into positive territory yesterday as investors remained cautious over Brexit and braced for a potential interest rate hike from the US Federal Reserve.

The FTSE 100 Index closed up 10.79 points at 7368.64, with Fed chair Janet Yellen expected to push up the cost of borrowing for only the third time since the financial crisis, increasing it by a quarter of a percentage point to 1.25 per cent.

Despite a subdued day's trading, energy stocks gave the top-flight some uplift thanks to a rebound in the price of Brent crude, which rose more than one per cent to US$51.67 a barrel. Royal Dutch Shell was up 7p to 2,190.5p.

Jasper Lawler, senior market analyst of London Capital Group, said the oil price rise had helped boost the UK's premier index, as European markets also paused ahead of the Dutch elections result.

He said: "Trading was muted on Wednesday as markets awaited a likely US interest rate hike and the first test of the populist uprising in 2017 via the Dutch election.

"Stocks could spring to life on tomorrow's open once the Fed has made its move and the Dutch election result is known," he said yesterday.

"A dead cat bounce in the price of oil after a string of sharp daily declines came to the aid of stock markets with energy the top rising sector.

"Having sold off during earnings season when oil prices were flat, energy stocks have outshone the underlying commodity in the recent decline."

Across Europe, Germany's Dax was up 0.1 per cent and the Cac 40 in France was 0.2 per cent higher.

On the currency markets, the pound pared gains against the US dollar after the latest tranche of economic data showed a drop in unemployment and a slowdown in wage growth.

The UK's unemployment rate has fallen to its lowest since the summer of 1975, with a record number of people in work.

However, average earnings increased by 2.2 per cent in the year to January, down by 0.4 per cent on the previous month, according to the Office for National Statistics.

Sterling eased back to rise 0.5 per cent to 1.221 versus the greenback, as currency traders became concerned about the squeeze on British consumers amid rising inflation and flagging wage growth.

The pound was also 0.2 per cent higher versus the euro at 1.147.

In UK stocks, Lloyds Banking Group rose 0.4p to 68.2p following the announcement that the government had sold off another slice of its shareholding.

UK Financial Investments, which manages the stake in Lloyds, cut its holding by around one per cent to 2.95 per cent, seeing the bank edge another step closer to full private ownership.

The sale means more than £19.5 billion has now been returned to government coffers since the lender's £20.3bn bailout at the height of the financial crisis.

Hikma Pharmaceuticals was at the summit of the biggest risers, as the firm hiked up its 2016 dividend by 3 per cent despite flagging revenues and profits.

Shares were up 171p to 2,297p, with annual net profits tumbling 39 per cent to US$155m (£126m) and revenues coming in shy of management expectations at US$1.95bn (£1.59bn).

The biggest risers on the FTSE 100 Index were Hikma Pharmaceuticals up 171p to 2,297p, Glencore up 9.1p to 325.1p, Babcock International up 20.5p to 914.5p, Antofagasta up 18p to 806.5p.

The biggest fallers on the FTSE 100 Index were Informa down 8.5p to 643p, TUI down 15p to 1,141p, Old Mutual down 2.7p to 222.8p, Persimmon down 24p to 2,073p.

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