FTSE 100 close: London index muted as interest rate fears linger
London’s FTSE 100 kicked off a new week just about in the green today as a reduction in UK debt costs gave the index a reprieve from a torrid time of late.
The capital’s premier index edged 0.23 per cent higher to close at 7,273.80 points, while the domestically-focused mid-cap FTSE 250, which tends to be a better reflection of the health of the UK economy, jumped 0.13 per cent to 18,027.96 points.
Advances on London’s top index have been anchored recently by amplifying bets on further interest rate rises from central banks in the coming months.
Federal Reserve officials are also tipped to lift borrowing costs at least two more times this year, resuming their tightening cycle at this month’s meeting. The European Central Bank is also expected to bump up rates at its next meeting.
“It seems likely the Federal Reserve, ECB and Bank of England will continue to raise rates in the fight against inflation,” Russ Mould, investment director at broker AJ Bell, said.
“Labour markets are holding up better than expected and plenty of businesses continue to grow profits. However, the more rates go up, the bigger the risk of a hard landing – reaching the point where a lot more consumers and businesses cannot cope with the higher cost of borrowing and we suddenly see a slump in the economy,” he added.
However, an easing in UK bond yields today supported the FTSE 100 and even led it “to eke out some gains today after losing further ground on Friday,” Michael Hewson, chief market analyst at CMC Markets UK, said.
The yield on the 2-year gilt today was broadly flat at 5.37 per cent, as was the rate on the 10-year instrument. Prices and yields move inversely. The latter is now above its post mini-budget level.
Last week the FTSE 100 closed at its lowest level since November, partially sparked by a hotter than feared non-official US jobs report compelling investors to price in more rate rises from central banks.
Cooling gilt yields kept pound sterling muted. It was flat against the US dollar, trading at $1.28.
Softer than expected inflation data from China early this morning kept risk sentiment subdued in the City. The rate of price changes is very close to negative territory, a signal that demand in the world’s second largest economy is curbing.
Lots of FTSE 100 firms generate their overseas earnings in China.
In London, BT boss Philip Jansen announced he will step down from his role in the coming year. The company’s FTSE 100 listed shares dropped 0.14 per cent on the news.
Bookmaker Flutter was best performer in the City, up nearly four per cent. Middle class favourite and online supermarket Ocado was the worst, shedding 1.76 per cent.
Oil prices climbed 0.3 per cent.