The FTSE 100 edged higher on Monday, propelled by a surge in mining shares, even as investors grappled with renewed concerns over the political independence of the US Federal Reserve.
Markets Unnerved by Federal Reserve Investigation
The London benchmark index closed up 16.10 points, or 0.2%, at 10,140.70, nearing recent record levels. The move came against a backdrop of significant geopolitical uncertainty and a startling development in Washington.
Over the weekend, Federal Reserve Chair Jerome Powell revealed that the central bank had received grand jury subpoenas from the US Department of Justice, threatening a criminal indictment. Powell stated the subpoenas related to his June testimony before the Senate Banking Committee and ongoing renovations at the Fed's headquarters.
He forcefully argued that these were pretexts, claiming the real issue was political pressure on monetary policy. "The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president," Powell said.
Russ Mould, investment director at AJ Bell, noted the probe had "unnerved markets" and raised serious questions about the Fed's future leadership once Powell steps down in May. "There is a fear that (US President Donald) Trump is meddling too much with policies that are meant to be set independently," he added.
Commodity Surge Lifts London's Miners
The anxiety over central bank independence triggered a classic flight to safety, sending the price of gold rocketing to a fresh all-time high. Gold shot up to $4,621.38 an ounce at Monday's close, a sharp rise from $4,504.56 on Friday.
This surge directly benefited London-listed precious metals miners. Fresnillo led the FTSE 100 risers, jumping 6.5%, while Endeavour Mining climbed 4.2%. The rally extended to base metals, with Glencore gaining 3.5% as the copper price advanced and on continued speculation of a potential tie-up with Rio Tinto.
Analysts at Wells Fargo observed, "Markets mostly took the news in stride, but the modest financial market moves thus far have been consistent with what we would expect to see when worries flare up about Fed independence: higher Treasury yields, a steeper yield curve, a weaker dollar and a rally in gold prices."
Mixed Fortunes for Individual Shares and Global Markets
Performance across the London market was mixed. The FTSE 250 ended marginally higher at 23,036.86, while the AIM All-Share index rose 0.8% to 796.86.
Barclays fell 2.5% after former President Trump called for a 10% cap on credit card interest rates via a post on Truth Social. Niklas Kammer, senior equity analyst at Morningstar, highlighted the sensitivity for Barclays, given its growing exposure to the US credit card market.
Other notable fallers included packaging group Mondi, down 2.5% after a Morgan Stanley downgrade, and equipment rental firm Ashtead Group, which dropped 2.9% following a Bank of America rating cut to "underperform". Property developer British Land tumbled 3.8% after its chief executive, Simon Carter, announced his departure.
On a more positive note, educational publisher Pearson rose 1.1% after Citi initiated coverage with a "buy" rating, arguing that fears over AI's impact were "overdone". Software firm Sage gained 2.0% following an upgrade to "buy" by UBS.
In European markets, Frankfurt's DAX 40 set another record, closing up 0.6%, while Paris's CAC 40 ended slightly lower. Stateside, the Dow Jones was down 0.2% at the London close, the S&P 500 was flat, and the Nasdaq Composite advanced 0.2%.
The financial week continues with key events including half-year results from Games Workshop and crucial US inflation data on Tuesday.
