The FTSE 100 was marginally lower on Wednesday as markets braced for the Federal Reserve’s interest rates decision later today.
Contagion from SVB and Credit Suisse appears to be contained which has helped sentiment improve this week.
In addition, bargain hunters are seeing value in FTSE 100 stocks after recent volatility, and their buying pressure will likely continue to provide support for the index.
UK banks were the standout performers as fears about the global banking system abated.
Barclays was up over 3% and NatWest gained more than 2%.
UK CPI
UK CPI unexpectedly rose in February, after months of declines, and raised the prospect of another Bank of England rate hike in the near future.
Higher interest rates will mount pressure on many areas of the economy but will help banking profitability.
Federal Reserve
The Federal Reserve are faced with a difficult decision later today; continue the fight against high level of inflation with a 50 bps rate hike, or accommodate market fears with a 25bps hike, or even no hike at all.
The Federal Reserve is trying carefully engineer a soft landing in the US economy by tightening monetary policy but not causing a recession. Looking to history for a playbook of tightening cycles, this is very difficult to achieve and many expect a recession.
No matter the decision later this evening, one would expect swings in US stocks over night that could spill over into tomorrow’s European session.