The FTSE 100 gained on Thursday and outperformed European indices such as the Germans DAX and French CAC following the release of the latest Federal Reserve meeting.
The FTSE 100 was 0.4% stronger at 7,499 whilst the German Dax declined 0.44% and the CAC eased by 0.2%.
The key driver for the FTSE 100’s outperformance was declines in GBP/USD which saw the return of the inverse relationship between the pound and FTSE 100. GBP/USD was trading down 80 points at 1.3381.
It was not so much weakness in the pound, however, more strength in the dollar as traders bought into greenbacks on the prospect of a series of aggressive US interest rate hikes this year.
“Federal Reserve chair Jay Powell failed to stop the market rout with the central bank’s latest policy update, with US stocks falling further after the announcement and the equity sell-off extending to most of Asia and Europe on Thursday,” said Russ Mould, investment director at AJ Bell.
“It’s what he didn’t say that troubled investors. The key concerns are how aggressive the Fed will be with raising rates – will they go up at every meeting this year, and will they go up by more than 0.25 percentage points each time?
“Powell said the central bank would be guided by the data and so growing investor fears that the Fed might be quite aggressive in its efforts to curb inflation remain intact as there was no clarity on exactly what would happen and when.”
UK banking shares dominated the FTSE 100 top risers on the prospect of higher rates globally. Dollar-earners Standard Chartered and HSBC led the FTSE 100 up 4.2% and 3.5% respectively.
Barclays, Natwest and Lloyds were all 2% stronger at the time of writing.
Fresnillo was again at the bottom of the FTSE 100 as precious metals sank on the prospect of interest rates bringing inflation under control.