The FTSE 100 was flat at the time of writing on Tuesday as surging miners offset declines in housebuilders as investors weighed the possibility of higher UK interest rates for longer.
The FTSE 100 was down 2 points to 7,568 at the time of writing after being slightly higher earlier in the session.
Investors were awaiting key US inflation data on Tuesday before the Federal Reserve interest rate decision tomorrow.
“The FTSE 100 was a touch higher but largely treading water ahead of US inflation numbers later on,” said AJ Bell investment director Russ Mould.
“These will offer a clue into the thinking of the Federal Reserve ahead of its meeting to decide interest rates tomorrow. A higher-than-expected number could hit market sentiment as it might suggest further US rate hikes are necessary.
“Compared with the Bank of England though, the Fed has a somewhat easier task. UK wage figures surprised on the upside to suggest inflation could be more persistent, which has driven gilt yields higher.
“We could be looking at higher rates for longer, with all the negative implications that has for the housing market and consumer spending. In such a scenario, the risks of a UK recession now have to be significantly higher.”
Investors reacted to the threat of higher UK rates by dumping FTSE 100 housebuilders.
FTSE 100 movers
Taylor Wimpey, Persimmon, Barratt Developments, and Berkeley Group Holdings were all down over 2% at the time of writing on Tuesday. Taylor Wimpey was down 3.4%.
Admiral was the FTSE 100’s top faller after Citigroup cut their rating to sell. Admiral shares were down over 6% at the time of writing.
“Admiral led the list of losers in the London market due to negative broker comment, and real estate stocks were also pressured thanks to the shift in UK rate expectations,” said Russ Mould.
Miners were storming ahead on Tuesday as China cut their 7-day reverse repo rate by 0.1% to 1.90% from 2.00%. The move had been largely expected after reports China were moving to stimulate the economy emerged last week.
Glencore was the FTSE 100’s top riser at the time of writing, gaining over 3.4%. Rio Tinto was up 3.1%.