The FTSE 100 dipped on Tuesday after investors were served an unwelcome reminder that the Federal Reserve rate cuts were by no means a certainty over the summer.
Comments from a Fed official overnight sparked a wave of concern about interest rates that washed up on the shores of UK stocks. Fed Vice Chair Jefferson suggested the Fed had not yet made up its mind on interest rates in a speech last night. The markets have priced in a very different story.
“It is too early to tell whether the recent slowdown in the disinflationary process will be long lasting,” Jefferson said.
After a series of softer inflation readings, both in the US and the UK, equity markets have quickly priced in rate cuts this summer.
Interest rate hopes have translated into an equity market rally that helped the FTSE 100 break to fresh record highs and stemmed a period of weakness in US stocks. The mere suggestion that these rate cuts may not transpire until later in the year has been enough to cause wobbles in stocks, and the FTSE 100 was down 0.4% at the time of writing.
“Investors want the Federal Reserve to say inflation is comfortably on track to hit its 2% target and that interest rates will undergo a series of cuts. However, the central bank is loathed to make such a commitment and so we’ve got underlying uncertainty in the market even though data points are supportive to this line of thinking,” said Russ Mould, investment director at AJ Bell.
“Comments from Fed Vice Chair Philip Jefferson at a conference in New York triggered a sense of nervousness in the market as he played down talk of imminent rate cuts. European markets weren’t impressed and opened Tuesday mostly in the red.”
AstraZeneca was a notable riser after outlining plans to boost annual revenue to $80bn per year by 2030. The Pharma giant has delivered on such promises before and investors bought into shares on Tuesday as the company detailed a strategy to launch 20 new medicines in the coming years.
The targeted $80bn revenue will represent a significant jump from the $45.8bn generated in 2023.
“Having stepped up to the plate and delivered on its $45 billion revenue goal set a decade earlier, AstraZeneca is now reaching for the stars with a new target to hit $80 billion revenue by 2030. The market liked the bold ambition, sending the shares to the upper part of the FTSE 100 leader board,” Russ Mould said.
“An easy way for AstraZeneca to achieve such a goal would be to go on a spending spree and buy up rival companies. However, AstraZeneca implies it will hit the goal through organic means which would be all the more impressive.”
Kingfisher was slightly weaker after announcing poor Q1 sales for their French business, which dragged on reasonably positive news from the UK.
“It’s a much tougher market these days for Kingfisher in comparison to the pandemic DIY boom,” said Adam Vettese, analyst at investment platform eToro.
“The Screwfix and B&Q parent company reaped the benefits of consumers stuck at home with a few extra pounds in their pocket and now we have the opposite in that people are returning to the office and feeling the pinch in terms of cost of living. Full year profit outlook has been maintained so it may not be time to panic just yet but there are indications of tougher trading conditions in other key markets such as France.”
Kingfisher shares were down 1.1% at the time of writing.
