London’s FTSE 100 kicked off a new week in soft style today, with gains held lower by investors sweating over a string of big central banks raising interest rates this week.
The capital’s premier index jumped 0.25 per cent to 7,784.88 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell 0.6 per cent to 19,914.41 points.
Today’s small advances in the City came ahead of the Bank of England, US Federal Reserve and European Central Bank (ECB) all announcing their next moves on borrowing costs this week.
Analysts expect Bank governor Andrew Bailey and ECB president Christine Lagarde to kick rates 50 basis points higher on Thursday, while Fed chair Jerome Powell is likely to slow down to a 25 basis point rise on Wednesday.
Although inflation has seemingly turned a corner in the UK, US and eurozone, central bankers are worried that if they hold off on rate rises now, they run the risk of allowing price pressures to stick around.
But, this week’s hikes from the Fed and BoE are expected to be their penultimate or final hikes in the current tightening cycle. The ECB is far finished, investors think.
“Stocks were on the back foot early Monday as attention shifts to this week’s vital Federal Reserve meeting, as well as supporting acts in the shape of ECB and BoE,” Neil Wilson, chief market analyst at Finalto, said.
FTSE 100 nudged higher today ahead of central banks’ rate decisions
Big British banks led the FTSE 100 lower in opening exchanges, with high street lender NatWest down 1.26 per cent, before eventually closing slightly higher, and Asia-focused bank Standard Chartered tumbling to the bottom of the index.
Lenders typically benefit from higher borrowing costs as they allow them to charge more for loans, but investors seemingly paid more attention to default risks rising due to debt servicing costs increasing after the Bank’s expected tenth back-to-back hike on Thursday.
House builders were the big losers in London, driven lower by the government demanding they get on board with committing to homes built with unsafe cladding within six weeks. The prospect of another rate increase has also soured the demand outlook in the property market.
Taylor Wimpey, Barratt Developments and Persimmon all shed more than 1.6 per cent.
Online betting giant 888 Holdings sunk more than 27 per cent on the FTSE 250 index today after its chief executive stepped down.
The pound weakened 0.2 per cent against the US dollar.
Oil prices fell nearly one per cent.