Traders in the City and on Wall Street will be eyeing how much their respective central banks hike interest rates by in a week of key economic and corporate announcements.
London’s premier FTSE 100 index posted a reasonable performance last week, adding 0.3 per cent to finish at 7,544.55 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, dipped 0.83 per cent to 20,708.71 points.
The Bank of England and US Federal Reserve announce their next decision on interest rates on Wednesday and Thursday respectively.
Both are expected to lift borrowing costs again, but diverge on how steep the hike will be.
Threadneedle Street is likely to send rates 25 basis points higher, marking the fourth successive meeting it has raised rates, taking them to one per cent, the highest level since 2009.
Meanwhile, across the pond, Fed chair Jerome Powell and co are anticipated to lift rates by double that amount, something they have not done since 2000 and breaking with the Federal Open Market Committee’s tradition of moving them in 25 basis point increments.
The decisions are likely to jolt markets as investors reposition their portfolios amid tighter financial conditions.
However, the size of the move in the City and Wall Street could be muted as higher interest rates have been baked in to trades for several months.
The sharp policy shift by the Bank and the Fed has been triggered by inflation in both the UK and US hitting levels not seen for decades.
On the corporate side, oil mega caps BP and Shell lead the way, posting first quarter results on Tuesday and Thursday respectively.
Both are expected to have raked in bumper profits from the Russia-Ukraine war sending energy prices soaring.
Fresh credit figures on Wednesday will be closely watched for signs of consumers tapping pandemic induced savings war chests to support spending amid a tightening cost of living grip.
Inflation is running at a 30-year high of seven per cent.