The FTSE 100 was broadly flat on Friday as London’s leading index consolidated after a landmark week for global monetary policy.
This week, the Federal Reserve sent strong signals to the market that they are well and truly done with the hiking cycle and were eyeing interest rate cuts next year.
Markets have quickly priced in up to 150bps in rate cuts by the Federal Reserve during 2024. The level of cuts predicted by futures markets is at odds with the Fed’s own projections, but there is a clear consensus US interest rates will fall next year.
Global stocks soared after Wednesday’s Federal Reserve instalment, with their dovish tone underpinning a risk-on rally.
The ECB and BoE provided their thoughts on interest rates yesterday.
While Europe and the UK’s central banks weren’t as dovish as the Federal Reserve, they certainly weren’t as hawkish as they have been in recent months.
“The FTSE 100 started the day modestly higher, consolidating its big gains from yesterday but not showing signs of extending its rally,” said AJ Bell investment director Russ Mould.
After starting the session higher, the FTSE 100 was trading down 0.3% at 7,627 on Friday.
Russ Mould continued to explain, “This may reflect the mixed messages coming from central banks this week. The market might be left feeling as if it has stepped through the looking glass. The Federal Reserve, despite a resilient US economy, is happy to talk rate cuts while the Bank of England and the European Central Bank, who face a much less rosy economic backdrop, are pouring cold water on hopes for a pivot.
“Perhaps the Bank of England and ECB remain concerned about energy prices and any possible inflationary pressures they might bring with winter upon us. America’s relative energy independence largely insulates it from this threat.
“Asian stocks pushed ahead as they reacted to the Fed’s dovish stance. The resulting weakness in the dollar tends to be good news for emerging markets.”
The FTSE 100’s miners were a beacon of light on Friday, posting strong gains on a day most other sectors traded negatively.
St James’s Place was the top faller after brokers cut their price target. The wealth manager shares were down 3.5% at the time of writing.
DS Smith was the top gainer, followed closely by miners Glencore, Anglo American, and Antofagasta.