Falling commodity prices weighed on the FTSE 100 on Wednesday, with declines in iron ore and copper hitting the mining sector as investors eye tomorrow’s Federal Reserve interest rate decision.
Antofagasta, Rio Tinto and Glencore were among the top fallers after a poor Asian session for copper and iron added to recent declines in the metals.
The sector played a big part in the FTSE 100’s record-breaking run during April and earlier May as copper prices rose to the highest point since 2022.
With miners having a respectable run since the beginning of the year, a soft period for metals prices will have spurred some investors to hit the sell button and bank profits.
Traders will also be watching tomorrow’s economic calendar for a potentially explosive series of events that have the potential to move markets.
We will first learn of US CPI for May, which is expected to be flat on April’s 3.4%. After last week’s blow out Non-Farm Payrolls report, any heating of inflation could be taken negatively by equity traders who have already pushed out interest rate cut expectations.
Later in the day, we will hear from the Federal Reserve and receive their interest rate decision. Although the ECB cut rates last week, the Fed is thought to be nowhere near reducing borrowing costs, and any move tomorrow will be a major shock.
The most interesting element of the Federal Reserve’s instalment tomorrow will be commentary. They are likely to say they are data dependent, but any hints of whether they will cut before reaching the 2% inflation target could move markets.
Housebuilders gain
On Tuesday, the Tories released a manifesto they will need a miracle to implement. That said, their big plans for the housing market fired up the housebuilders and Persimmon, Taylor Wimpey, and Barratt Developments were among few gainers on the day.
The housing market is becoming one of the fiercest political battlegrounds in the election campaign, and there is a school of thought Labour – who will likely be in power after 4 July – are likely to try and match the Conservatives on some of their housing pledges.
“A lot of people want to get on the property market but are struggling to do so when interest rates are high and housing supply is tight which props up prices. It’s no wonder the Conservatives have put housing on their priority list for the election, with several measures unveiled as part of their strategy to try and stay in power on 4 July,” said Russ Mould, investment director at AJ Bell.
“A stamp duty cut for some first-time buyers, a new Help to Buy scheme, and tax cuts for landlords who sell to tenants all provide a tailwind for companies on the stock market linked to residential housing.
“Housebuilders including Persimmon and Taylor Wimpey, DIY groups such as Wickes and B&Q owner Kingfisher and estate agents including Foxtons all saw their shares move higher on the news. The big unknown is whether the Conservatives will be able to action these initiatives given they are lagging behind Labour in the polls.”
