Defensive stocks provided the FTSE 100’s upside support on Wednesday as investors rotated into equities that tend to do better during economic downturns.
The FTSE 100 was 0.45% higher at 7,670 at the time of writing.
The recent mini banking crisis diverted attention from the underlying health of the global economy – and presented investors with a range of bargains in the aftermath.
Now the FTSE 100 has rebounded from the lows, markets will become increasingly conscious of the economic outlook and ramifications for company earnings.
OPEC’s move this week to cut production adds to uncertainty. “Clearly, it’s not a positive for global growth,” said Janet Yellen, US Treasury Secretary.
The cut in production risks higher inflation and the possibility of higher interest rates. This could derail the global economy.
“The concern is the Federal Reserve might have to sound the retreat before its war on inflation is truly done. This could leave us with the worst of all worlds – the dreaded stagflation where the economy is shrinking but prices are continuing to surge higher,” said AJ Bell head of financial analysis Danni Hewson.
In preparation for the possibility of choppier times ahead in markets, investors bought into UK-listed utilities, precious metals and pharmaceuticals on Wednesday.
United Utilities was the top gainer at the time of writing, up over 3%. There was also interest in Severn Trent in Centrica, both of which added more than 2%.
AstraZeneca was up around 2% and added a significant number of points to the index due their large market capitalisation.
The rotation away from cyclical stocks was clear. Housebuilding, mining and retail stocks were all in the red.