The FTSE 100 was flat on Thursday as investors digested central bank guidance on interest rates after the Fed paused rate hikes and ECB hiked by 0.25%.
Last night the Federal Reserve held rates at 5%-5.25% but provided a hawkish outlook on rates which suggests the Fed will hike again twice this year. US stocks sank overnight and were pointing to a lower open on Thursday.
“The Fed’s decision to pause rates at the 5.0% to 5.25% range yesterday were met with a luke-warm reception, largely due to the hawkish tone set for the rest of the year,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
The ECB followed on Thursday with a rate hike and a similarly hawkish outlook as ECB President Lagarde said it is likely the ECB will hike rates again in July.
The German DAX was down 0.6% at the time of writing while the FTSE 100 shook off rates concerns to gain 0.1%.
The Bank of England will meet and decide on interest rates next week – economists expect the BoE will also hike rates by 0.25%.
FTSE 100 movers
After avoiding demotion from the FTSE 100 by the skin of its teeth, Ocado shares have steadily rallied, and the rally continued on Thursday with a 3% gain.
Halma was the FTSE 100’s biggest disappointment on Thursday after the life-saving technology group provided lower guidance than the market had expected.
“Halma delivered record full-year record and profit, though headline figures were somewhat flattered by weaker sterling which meant its overseas income was worth more,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
“Looking under the hood, revenue was above expectations, but there was some weakness in margins due to supply chain disruptions, particularly in the safety sector. Guidance here was a little lower than markets were expecting, with return on sales expected around 20% for the coming year – analysts had pencilled in 20.4%, which is likely why shares are down in early trading.”
Legal & General shares were down over 2% after CEO Nigel Wilson announced he would step down.
“The new boss at Legal & General has a hard act to follow. Since Nigel Wilson was appointed to the top job in June 2012, Legal & General shares have outperformed its life insurance peers, Aviva and Prudential, to chalk up a total return of more than 200%,” said AJ Bell investment director Russ Mould.