The FTSE 100 was lower on Thursday after a poor finish to US stocks last night following the release of the Federal Reserve’s minutes.
Investors have been locked into a game of cat and mouse with the Federal Reserve on the trajectory of interest rates, and last night’s minutes suggest the Fed is not yet done raising rates.
The FTSE 100 was trading down 0.3% after US stocks fell on further rate hike fears last night. The S&P 500 closed down 0.76% at 4,404 overnight.
“The fight again inflation in the United States is still ongoing, with the minutes from the Federal Reserve meeting indicating that another rate hike is still on the table, which has the potential to push the US into a deeper downturn,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“Reaching the target rate of inflation of 2% is proving a very hard nut to crack. Policymakers only have the blunt tools of rate hikes to do it, so they risk sending splinters of pain across the wider economy.”
China’s economic woes took a backseat on Thursday, with a late rally in Asian stocks spilling over into the FTSE 100’s China-focused stocks, among the few gainers. Rio Tinto, Prudential and Standard Chartered were the top risers gaining 1%-1.3%.
The general risk-off tone in markets is being demonstrated by the FTSE 100’s cyclical sectors failing to lift the index. UK banks were marginally higher on Thursday.
Housebuilders were lower ahead of tomorrow’s UK retail sales data, which could reveal a slowdown in spending and a weakening in the UK’s consumer health.
BAE Systems was the FTSE 100’s top faller after announcing the acquisition of Ball Aerospace for $5.5bn.
We wrote earlier this week that the FTSE 100 was in a descending triangle technical formation and looked set to test the 7,200-7,300 region.