This year has been punctuated by expectations of interest rate trajectories and today was a reminder we are not yet at the end of the hiking cycle.
Strong US jobs numbers last week have highlighted the required economic weakness for a Fed ‘pivot’ is still some months away, and rates will increase before they start to fall.
Nonetheless, the FTSE 100’s losses were slight and the index remained above 7,500.
“We’re very much in looking glass territory again with investors desperate for the Fed to ease up on rate hikes and therefore taking any bit of good news about the economy as bad news because it will delay the longed-for pivot,” said AJ Bell investment director Russ Mould.
“Better-than-expected figures from the US services sector, combined with some profit taking after a strong run, resulted in losses across the Atlantic overnight and the negativity permeated into Asian shares with some of the optimism about a loosening of Chinese restrictions also beginning to fade.
“The next key US releases come on Friday with producer prices data and a reading of consumer sentiment. Next Wednesday is decision day on US rates and the Fed’s actions could help set the tone for the tail end of 2022 and first weeks of 2023.”
Oil and gas shares
Although the FTSE 100 was trading negatively on Tuesday, roughly half of the constituents were trading higher. However, weakness in oil major Shell and BP dragged on the index as oil prices fell on concerns around Chinese demand.