The FTSE 100 followed a familiar trading pattern on Wednesday as the index traded broadly sideways with traders unprepared to make big bets ahead of the Federal Reserve and Bank of England meetings.
London’s leading index was higher by 0.15% at the time of writing.
That said, the minor gains were notable given investors were digesting another disappointing UK economic data point in UK CPI remaining firm at 3.8%.
The FTSE 100 held its own despite the sticky inflation data that suggested the Bank of England would keep rates on hold this week. Investors will also be mindful that the BoE expects inflation to rise again before the end of the year, which is likely to curtail hopes for further UK rate cuts.
“The mix broadly matched expectations and keeps the BoE focused on sticky domestic pressures without adding urgency to cut again this week,” said Daniela Sabin Hathorn, Senior Market Analyst at Capital.com.
“The bank has flagged a possible near-term uptick toward 4% in September before a gradual drift lower, so the reading is seen as confirming the likely outcome of the central bank’s meeting tomorrow, keeping rates unchanged at 4%. The reaction in UK assets has been muted as focus remains on a few busy hours ahead with the likelihood of fresh volatility around the FOMC meeting.”
Although the latest UK CPI reading could have ramifications for UK financial markets through the rest of the year, investor focus today will be on the Federal Reserve’s interest rate decision.
“It’s the big day investors have been anticipating all year – the first likely rate cut from the Federal Reserve in 2025. It’s a question of how much, not if,” said Russ Mould, investment director at AJ Bell.
“The market expects a quarter percentage point cut in recognition of a cooling jobs market. That result could help financial markets to keep trucking along, but a half a percentage point cut could spook investors that the Fed has become more concerned about the economic outlook. Whatever the outcome, it’s feasible that Donald Trump will say the Fed is still not doing enough to lower the cost of borrowing for consumers and businesses.”
FTSE 100 movers
Supermarkets were higher after encouraging Kantar sales data with Marks & Spencer, up 3%, topping the FTSE 100 leaderboard. Sainsbury’s gained 2%.
Barratt Redrow edged 0.7% higher as investors chose to look past soft completions in the previous year to focus on the group’s outlook.
“Barratt Redrow’s full-year results didn’t bring any major surprises as the housebuilder saw aggregate completions fall by nearly 8% to 16,565 new homes,” explained Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“Hurdles, such as higher stamp duty, slow changes to planning approvals, and a softer market in London have all weighed on buyer demand. But these numbers were already built into market expectations after a short trading update back in July.”
“The outlook was a key focus, and an expected uplift in buyer activity should see Barratt deliver between 17,200 and 17,800 new homes in the period. This assumes a normal Autumn selling season, though. However, the unusually late timing of this year’s Budget, and the uncertainty it brings around taxation and buyer affordability, means these targets are anything but guaranteed.”