The FTSE 100 dipped on Friday as traders took stock of an action-packed week of AI debate and central bank moves.
London’s leading index rallied into yesterday’s close after the Bank of England voted to hold rates at 3.75%, but gave back some of those gains on Friday with the Japanese central bank entering the fray.
The FTSE 100 was down 0.5% at the time of writing on Friday after the Bank of Japan raised interest rates to the highest levels since 1995.
Markets will have raw memories of the volatility when Japan raised rates in 2024, sparking an unwind of the Yen carry trade, which is reflected in softer trade on Friday.
Lale Akoner, global market strategist for etoro, said: “One of the world’s last sources of ultra-cheap money is disappearing. The Bank of Japan has raised rates to 1.25%, their highest in 31 years, further dismantling a monetary regime that helped push Japanese capital into markets around the world. Yet the yen weakened after the decision, showing investors are already asking how quickly the BOJ can go again.
“For investors, this has implications beyond Japan. Rising Japanese yields give domestic investors more reason to keep money at home, potentially reducing demand for overseas bonds and making yen-funded carry trades less attractive. The risk is not a sudden exodus of Japanese capital, but the gradual disappearance of a buyer global markets have long taken for granted.”
Trading was somewhat balanced on Friday, with falling oil prices easing fears of a series of additional rate hikes globally.
“Revived hopes for a resolution to the crisis in the Middle East have helped sustain a recovery in global equities but European stocks took a pause for breath on Friday,” says AJ Bell investment director Russ Mould.
“The FTSE 100 wasn’t helped by its heavy weighting in energy as BP and Shell reacted to further falls in the oil price. Brent crude declined for a third consecutive session, even if it remains stubbornly above the $100 per barrel alarm bell mark.
“A pullback in oil has dialled down fears about inflation and helped government bond yields ease from their recent multi-year highs.”
BP fell 1.5% and Shell lost 1.3%.
Telecoms stocks were notably weaker on Friday, with Airtel Africa, Vodafone, and BT at the bottom of the leaderboard. Airtel Africa was the FTSE 100’s biggest faller on reports that it was scaling back its Airtel Money IPO.
This is both a kick in the teeth for Airtel Africa and London’s public markets, which could have done with the originally planned £1.5bn raise.
Miners were also among the losers, dragging on the FTSE 100 index. Glencore fell 2.9%, while Metlen dipped 2.3%.
IG Group was the FTSE 100’s top riser, gaining 1.8% as bargain hunters stepped in to pick it up as it bounced along the lows.