The FTSE 100 was broadly flat on Monday as investors readied for the Federal Reserve interest rate decision later this week, when it is expected that US interest rates will be cut by 0.25%.
London’s leading index was 2 points higher at 9,668 at the time of writing, with investors holding off making major changes to their portfolio.
“Europe got off to a quiet start, with minimal movement among the main equity indices,” said Dan Coatsworth, head of markets at AJ Bell.
“The FTSE 100 held firm as strength among industrials, basic materials and healthcare was offset by weakness in consumer stocks and real estate.
Coatsworth continued to explain that the US interest rate decision this week may be a non-event, with a rate cut already nailed on, leaving little reason to reposition before or after Wednesday’s decision.
“On the economics front, the big event of the week is the US interest rate decision on Wednesday where the market is pricing in an 87% chance of a quarter percentage point cut. Markets may not rally if we get a 25 basis-point cut, given how investors are already expecting it to happen. Instead, markets are only likely to move in a large way up or down if we don’t get a cut or if the cut is much bigger than expected.”
Far less certain is what the Bank of England will do when it announces its decision on 18th December. Markets are pricing in a 0.25% interest rate cut to 3.75% but there are questions about whether traders are being overly optimistic, given persistently high UK inflation.
This may be part of the reason behind lower housebuilding shares on Monday, which appear to be running out of steam after a post-budget bounce.
Persimmon, Barratt Redrow, and Berkeley Group were down between 1.75% and 2% at the time of writing.
Unilever was the top faller after completing the spin-out of The Magnum Ice Cream Company, which started trading in London, Amsterdam, and New York today.
Prudential was the top riser, jumping 2%, after an update on the sale of shares in ICICI Prudential Asset Management on Indian stock markets.