Markets await Fed’s lead

•       FTSE 100 up, Glaxo leads way after earnings beat
•       Technology shares gain after Apple’s results
•       Pound fails to rally despite pickup in GDP
•       Fed announcement will drive markets on Thursday

Earnings have taken centre stage in the stock markets, with GlaxoSmithKline the biggest gainer in the FTSE 100 after it reported a strong rise in key revenue and profit figures that beat expectations. Its results were buoyed by the drop in the pound, but a boost from new drug sales suggest the turnaround strategy of Chief Executive Andrew Witty is paying off.

Glaxo announced £275 million of new investment at three drug manufacturing sites in Britain, despite having argued against Brexit ahead of the EU referendum vote. There have been some large headline investment announcements since the referendum, but this isn’t likely to be enough to stave off an economic hit from the result.

Indeed, the pound has fallen against the euro even though economic growth was stronger than expected in the second quarter at 0.6%. The market is looking at the third quarter, when the Brexit vote will become apparent, and it is expecting weakness in the economic data.

Elsewhere, tech stocks are doing well on the back of Apple’s results. While iPhone sales were down, markets are taking a longer-term view and are taking comfort from the company’s assurances that the low-point has been passed and the fact that sales of the cheaper version of the phone seem to be picking up.

Early action on Thursday will be driven by tonight’s announcement from the US Federal Reserve. It’s expected to keep rates unchanged again, but may provide clues on the timing of the next rate hike given the recent improvement in economic data and lower global risks now the UK’s referendum result is known.