London’s premier index closed the week slightly in the green after a quiet day ahead of next week’s crucial inflation print.
The FTSE 100 slipped out marginal gains to trade at 7,440.65 while the midcap FTSE 250 index dropped 0.2 per cent to 18,594.73.
All eyes will be on UK inflation data next week. Inflation has remained stubbornly above the Bank of England’s two per cent target, forcing the central bank to raise rates higher and faster than markets had hoped.
Investors will hope that inflation finally comes in below expectations after a series of unpleasant surprises.
Victoria Scholar, head of investment, interactive investor, said: “After defying expectations by coming in hotter-than-anticipated last month, the UK headline rate of inflation is seen falling back on Wednesday, although it is expected to remain above eight per cent, highlighting the lingering price pressures in the domestic economy.”
“Central bank watchers will be paying close attention to Wednesday’s inflation reading. Current expectations are for a 50-basis point hike from the Bank of England at its next meeting in August, although this could shift to 25 basis points if the inflation data posts a notable drop,” she continued.
On the FTSE 100 engineering firm Spirax-Sarco topped the index, rising 3.5 per cent.
Shares in Burberry rose 1.2 after it reported a 17 per cent increase in revenue.
“A large reason for the uplift stems from a rebound in demand from Asia and especially mainland China, after restrictions this time last year dented performance. European tourists also helped tow the top line in a big way,” Hargreaves Lansdown’s Lund-Yates said.
Although the fashion designer saw strong sales growth across much of Asia, in the Americas it reported an eight per cent decline.
Lund-Yates pointed out the fall in US revenue likely reflects the tougher economic conditions in the US.
“The US is depleting its savings at a faster rate than other areas, reducing consumers’ sense of resilience and therefore willingness to spend on non-essentials,” she said.
The pound slipped slightly but remained above $1.31, its highest level since April last year.
The sharp fall in US inflation has convinced investors that the Fed is nearing the end of its hiking cycle while the UK’s much higher rate of inflation means the Bank of England will likely have to keep raising interest rates.
Higher interest rates tend to attract foreign investment, boosting the value of the domestic currency.