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FTSE 100 falls as global markets struggle ahead of key central bank decisions

The FTSE 100 fell on Monday amidst a global equity selloff following a 0.3% contraction in UK GDP reported by the ONS today, and ahead of key central bank meetings this week.

The UK markets were faring slightly better than other international markets, however the difference was credited to slide in the Sterling rather than any market strength.

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“Once again in 2022 the FTSE 100 is doing a smidge better than other global markets but, before UK investors get too excited, a big slide in sterling is a significant contributing factor to the outperformance,” said AJ Bell investment director Russ Mould.

Meanwhile, markets across the globe continued to slide after US inflation hit a 40-year record of 8.6% in May and all but confirmed a hawkish US Federal Reserve move on interest rates at its next meeting.

The NASDAQ dropped 3.5% to 11,340, the NYSE was down 2.4% to 15,096.6, the French CAC decreased 2.1% to 6051.9 and the German DAX fell 2% to 13,479.9.

“The hangover from a higher than expected US inflation reading is continuing to cause scissoring pain throughout the markets, as it extinguishes the hope the US Federal Reserve might be able to take its foot off the pedal on interest rate rises,” said Russ Mould.

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“The mood out there is pretty grim, with the relief rally seen in late May starting to feel like a distant memory,” said Mould.

Risk off trade

Gold miner Fresnillo was one of the only stocks to experience a boost in the market, with a 5.1% gain to 786.7p as investors flocked to safe havens.

“You know things are bad when the best performer among the UK’s top stocks is precious metal producer Fresnillo as investors reach for traditional safe havens,” said Mould.

Industrial metals stocks took a nosedive, as China went back into lockdown shortly after announcing its end as cases kicked off again last week.

Mining groups saw their shares dip as fears sparked over a slowed rate of production in the factory of the global economy, with Glencore dropping 5.3% to 477.9p, Antofagasta falling 4.9% to 1,362p, Anglo American sliding 4.4% to 3,455p and Rio Tinto losing 3.2% to 5,504p.

The Hang Seng declined 3.3% to 21,067.5 and Scottish Mortgage Investment Trust suffered a hit of 4.3% to 3,455p as a result of its shares in Asia-focused companies including Alibaba and Tencent tumbling on the back of China’s lockdowns, along with sharper interest rate fears from the US Federal Reserve.

With interest rates predicted to rise from the Fed on Wednesday, and the Bank of England expected to hike its interest rates an additional 0.25% to 1.25%, companies are feeling the pressure of being between a rock and a hard place in expenses and a drop off in consumer demand.

“Investors are likely to remain jittery at least until the Fed has delivers its verdict on rates on Wednesday, with the Bank of England following suit a day later,” said Mould.

Crypocurrency crash

Bitcoin and Ether fell 10% and 13% respectively as Cryptocurrencies fell in line with global equities.

‘’As inflation proves to be an even trickier opponent to beat than expected, Bitcoin and Ether are continuing to get a severe bruising in the ring. They are prime victims of the flight away from risky assets as investors fret about spiralling consumer prices around the world,” said Susannah Streeter, analyst at Hargreaves Lansdown.

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