The FTSE 100 was higher on Monday as mild optimism crept into equity markets with investors choosing to focus on the recent market repricing of the number of US interest rates set for this year.
London’s leading index was 0.3% higher at the time of writing.
Banks, including JPMorgan, are now predicting the Federal Reserve will cut rates in September, and interest rate markets are pricing on 50 bps of cuts by the end of the year.
This is in contrast to the pricing of just one interest rate cut this year before a poor US jobs report at the beginning of August.
“A pulse of positivity also sent stocks on Wall Street back towards record levels on Friday and US indices are set for a higher open as optimism continues to swirl,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“But there could be a swift change in sentiment. The focus will be on US inflation numbers out this week, a key determiner for the Fed’s interest rate decision next week. With Trump’s tariffs set to make swathes of goods more expensive for American consumers and businesses, investors will want to see to if higher prices are landing and what the outlook is likely to be ahead.”
FTSE 100 movers
The FTSE 100’s gain was broad, with the majority of constituents trading positively at the time of writing.
However, while most shares were higher, there were few risers adding more than 1%.
Pharma heavyweights AstraZeneca and GSK were higher by over 1% helping support the wider index. GSK announced that the FDA had accepted a gonorrhoea treatment for priority review, although this wasn’t majorly price sensitive.
Defence-related stocks were weaker, with BAE Systems and Babcock losing over 1% as defence-spending euphoria continued to diminish.
Melrose was the top FTSE 100 faller, dropping 1.8%, on nothing more than profit taking after the stock touched the highest level since the announcements of Trump’s Liberation Day tariffs last week.