UPDATE 1-FTSE 100 recovers on Fed effect, Dixons sinks

London's FTSE 100 rebounded on Thursday, led by strong gains in oil majors and miners as investors were encouraged by signals the U.S. Federal Reserve is preparing to cut interest rates soon, while electronics retailer Dixons Carphone tanked.

The FTSE 100 index was up 0.4% and the FTSE midcap index rose 0.5% by 0736 GMT with BP and Shell both up more than 1% after Middle East tensions drove crude prices higher. The U.S. Federal Reserve kept interest rates unchanged on Wednesday and signalled rate cuts could start as early as July, adding to the conviction among investors that officials will act strongly to stem any impact on growth of global trade tensions.

Precious metals miner Fresnillo led gains with a 4.2% rise, having earlier jumped as much as 7%, as gold prices hit their highest in more than five years following the Fed statement. "This marks a u-turn of its 2015-18 hiking cycle, and its patience since March 2019, and provides investors with more certainty about the outlook for the price of money," Accendo Markets analyst Michael van Dulken said.

The FTSE, buffetted by Britain's chaotic attempts to leave the European Union, fell only around half as much as other major stock markets in a sell-off in May, a reflection of the aid its largely international companies get from a weakened pound. In turn, its gains in June have been more subdued: around 3.6% so far this month versus gains of almost 5% and 7% respectively for the pan-European STOXX 600 and New York's Dow Jones Industrial Index.

In contrast to the Fed, the Bank of England is expected on to stick with its threat to raise interest rates at its own policy meeting later on Thursday, offering no help to consumers and companies for fear of hammering the pound. "In practice it might be a bit bland in comparison with what has been produced by its US and Eurozone peers, Mark Carney and co.'s hands (are) still tied by Brexit," Spreadex analyst Connor Campbell said.

Among midcaps, Dixons Carphone plunged 18.4% to a decade-low after it reported a slump in full-year profit and pointed to worse to come as it struggles in a fierce mobile phone retail market. Blue-chip Russian steelmaker Evraz fell nearly 5% after a discounted share sale, while United Utilities lost 4.1% as its stock moved ex-dividend.

In contrast, homewares retailer Dunelm climbed 4% to a three-year high after it raised its annual earnings target for the second time in just over two months, capping a year of surging online orders. N Brown Group, which focuses on plus-size clothing, rose 2% as the retailer's quarterly sales fell less than Jefferies' estimates and it reported a rise in clothes sold online amid its digital push.