The FTSE 100 was broadly flat on Monday as investors readied for UK inflation data later this week and the resultant implications for the Bank of England.
The FTSE 100 was up 4 points to 7,761 at the time of writing.
“Despite the UK stock market having ground to a halt in recent weeks, there is no reason to panic. Year-to-date the FTSE 100 is up 4.4%. Annualised that would equate to an approximate 10% return, and if you add on 3% dividend yield, you’re looking at a potential 13% total return which is slightly better than one might expect from UK equities in a normal year. So far, so good,” said Russ Mould, investment director at AJ Bell.
Mould continued to explain corporate updates are starting to slow after weeks of final results and Q1 updates, and the focus will shift to economic data points and central bank commentary.
“The week ahead is fairly quiet when it comes to corporates updating on trading, with only a few names in the retail, tech and utilities space standing out. That means market sentiment is likely to be driven by political and economic events, including any update on the US debt ceiling talks, UK inflation data and the minutes from the latest Federal Reserve interest rate meeting on Wednesday, as well as insight into durable goods orders and personal spending in the US at the end of the week.”
This week could mark a step change in UK inflation data, with economists predicting that UK CPI in April will fall below 10%.
“We are expecting the pace of the cooling in UK inflation to quicken markedly in April, from 10.1% to 8.3%, and this will likely help those amongst the Bank of England’s rate setting committee breath a sigh of relief,” said Joshua Raymond, Director at online investment platform XTB.com.
“Whilst this would be the lowest rate of UK inflation since April 2022, it’s unlikely to drastically change the outlook for UK rates in the coming months, where the market is still forecasting around two separate hikes of 0.25%, yet that could change if we see UK inflation fall faster than expected to 8% or below.”
NatWest
NatWest shares were 1% higher after the UK government further sold down their stake in the bank. The government sold a £1.26bn stake in NatWest to reduce their total holding from 41.4% to approximately 38.6%.
“The UK government has sold another chunk of shares in NatWest but the fact it is still left holding 38.6% means there continues to be a big overhang for the stock, which is likely to remain the case for some time given the slow pace of selling down,” said Russ Mould.
“After all, it’s been 15 years since the bank was bailed out by the government and the latter still owns more than a third of the company.”
JD Sports was the FTSE 100’s top riser, gaining 2.7%, as bargain hunters stepped in to pick up shares after a sharp selloff on Friday.
Bargain hunters also showed interest in Ocado and Burberry after recent declines in the stocks. Ocado is the FTSE 100’s worst performer this year after shedding approximately of its value.