FTSE 100 close: New year rally loses steam on central bank rate warnings and Ocado slump
London’s FTSE 100 premier index’s new year rally lost some steam today driven by investors wobbling over a string of hawkish comments from central bankers and Ocado’s shares slumping.
The flagship index shed 0.39 per cent to close at 7,694.50 points, while the domestically focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, lost 0.45 per cent to fall to 19,390.97 points.
The losses were sparked by traders betting top central banks, such as the Bank of England and US Federal Reserve, will push back against market optimism over how high interest rates will peak this year.
Chief economist at the Bank, Huw Pill, who admitted it underestimated the surge in inflation, yesterday signalled he will back another 50 basis point rise at the next MPC meeting on 2 February, sending borrowing costs to four per cent.
He unveiled the Bank is concerned about soaring wages – which are trailing inflation – engineering “persistent” price rises in a speech in the US yesterday.
FTSE 100 broke its winning streak today
“The labour market holds the key and we’re not seeing much in the way of slack,” said Neil Wilson, chief market analyst at Finalto.
Fed officials have also hinted at more steep rate increases this week. Investors had expected chief Jerome Powell to follow that tone in a speech at an event hosted by the Swedish central bank. He ended up glossing over discussing policy.
Recent data has indicated inflation in the UK and US has passed its peak and will gradually fall 2023, raising the likelihood of the Fed and BoE taking their feet off the accelerator.
Middle class favourite and online supermarket Ocado dragged the FTSE 100 lower, losing more than four per cent and sinking to near the bottom of the index.
The company’s shares tanked last year as shoppers returned to physical supermarkets after Covid-19 restrictions were lifted. It has kicked off 2023 positively.
Pound sterling weakened around 0.2 per cent against the US dollar.
Oil prices climbed around one per cent despite dropping in early trading.