The FTSE 100, along with global equity markets, were in wait and see mode on Wednesday as investors prepared for the latest instalment of commentary and decisions on monetary policy.
The Federal Reserve is expected to hike rates by 75 bps to a 3.75%-4% Federal Funds rates while economists are forecasting the Bank of England raises rates 75 bps to 3%.
“After a positive couple of days, the FTSE 100 was in consolidation mode on Wednesday,” said AJ Bell investment director Russ Mould.
“All eyes will be on central banks on both sides of the Atlantic as both the US Federal Reserve and Bank of England get ready to deliver their rate decisions over the next 24 hours or so.
“While we have a good idea of the quantum of increase both parties will deliver, it will be all about the mood music. Investors are like thirsty travellers in the desert, hoping for even the tiniest drop of comfort to suggest the rate cycle may have run its course.”
Fed Pivot
The Fed pivot, or hopes of a Fed pivot, is an integral driving force behind risk appetite and demand for equities. The Federal Reserve is set to hike rates by 75 bps for the fourth time in a row and markets will be keenly watching to see if this pace is set to be continued.
Investors have been accessing economic conditions in an attempt to gauge the Fed’s next move and there has been little to suggest to major economic slowdown warranting a change in pace. Inflation rates remain stubbornly high and unless there are signs of economic deterioration, the Fed has no reason to even think about cutting rates.
The language used in statements accompany the Federal Reserve and Bank of England’s decisions could set the tone for equities going into the end of 2022.
Corporate updates
While markets are fixated on central banks today, a number of FTSE 100 constituents have provided relatively positive updates.
Next maintained their full year guidance after a promising third quarter update punctuated by seasonal swings in sales likely due to warmer weather.
GlaxoSmithKline’s third quarter was robust with sales rising 18% £7.8 billion helped by bumper increases in speciality medicine revenue.