After shaking off initial concerns about interest rates after yesterday’s Sintra central bank panel, the FTSE 100 reacted to the prospect of higher rates for longer on Thursday.
The Sintra panel included the heads of the Federal Reserve, ECB, Bank of England and Bank of Japan. The general message was to expect additional rate hikes in the near term and not to expect interest rates to fall anytime soon.
The FTSE 100 was down 0.16% to 7,488 at the time of writing.
“The FTSE 100 was on the back foot on Thursday as central bankers used a conference in Portugal to ram home the message that more rate hikes could be coming and rates could stay higher for longer than the market thinks,” said AJ Bell investment director Russ Mould.
“The next set of central bank meetings in late July and early August will provide the proof in the pudding and until then markets may continue to hedge their bets.
“Monetary policymakers must balance the need to show their commitment to fighting inflation, while also having some awareness that there will be a lag before their actions take full effect in the economy and not creating so much stress in the financial system that something breaks. It’s not an easy task.”
FTSE 100 movers
Ocado continued to be the most volatile FTSE 100 constituent with a 2% after trading down as much as 10% intraday yesterday. Ocado has a Beta of 2.37, meaning the company’s shares move 2.37x the rate of the benchmark FTSE 100 index.
B&M European Value was the FTSE 100’s top faller after releasing a trading update for the 13 weeks from 26 March 2023 to 24 June 2023. By all accounts, it was a positive trading period in which B&M’s like-for-like sales rose 9.2%, and total revenue jumped 13.5%.
Nonetheless, B&M shares were down 6% at the time of writing.
“B&M is the ultimate play on the cost-of-living crisis, offering a range of goods at cheap prices. Chief executive Alex Russo says the business has ‘strong trading momentum’ which is no wonder when interest rates keep going up,” said Russ Mould.
“So why has the share price fallen 6% on the news? It could be the lack of full-year guidance which implies no upgrades to earnings expectations. The shares have already had a strong run this year, up more than 30%, so perhaps some investors are banking profits while the going is good.”