The FTSE 100 dipped on Monday as traders geared up for a busy week of central bank action including rate decisions from the Federal Reserve, Bank of England, and Bank of Japan.
The FTSE 100 booked the best week of gains for some months last week as the European Central Bank hiked rates but suggested they were done with the current hiking cycle.
“Last week’s positive sentiment on the markets failed to extend to the new trading week. All the major European indices were in the red on Monday, albeit only by a small margin. The FTSE 100 slipped 0.15% to 7,699, dragged down by utilities and real estate,” said Russ Mould, investment director at AJ Bell.
“It’s a big week ahead for central bank interest rate decisions, which can understandably make investors a bit jittery. The Fed reports its decision on Wednesday, with the Bank of England following the next day.
“There are mixed opinions regarding what the Fed will do. Some experts believe it will pause and make no change to US interest rates; others believe a quarter point rise is coming. Despite companies starting to discuss weakness in US consumer spending, the economy is still looking resilient. Therefore, the Fed might wish to continue its rate hike path in the fight against inflation.
“As for the Bank of England, the consensus forecast is a quarter point rise to 5.5%. The big question is whether that would be the final rate hike of the current cycle.”
Markets are pricing an 80% chance the Bank of England will hike rates on Thursday.
The UK property market is under immense pressure as a result of the BoE’s hiking cycle which was evident in Monday’s trade with investors selling FTSE 100 housebuilders before this week’s rate decision.
Barratt Developments, Taylor Wimpey, and Persimmon were down between 2%-3%.
Real Estate Investment Trusts were also out of favour with Land Securities dropping 2.8%.
FTSE 100 gainers were few and far between on Monday. Ocado was the top gainer after analysts at Jefferies increased their price target to 750p.