The FTSE 100 convincingly broke 7,800 on Wednesday as London’s leading index continued the recovery from the banking crisis saga.
One may dare to suggest if the momentum in the current rally continues, the index could attack the psychological 8,000 level in the coming days.
The FTSE 100 was trading at 7,822, up 0.5% at the time of writing. The S&P 500 was 0.3% to the good.
Stock specific news was light on Wednesday and all eyes were on US inflation data and the ramifications for the global economy.
The nervousness in markets around inflation was demonstrated with the sharp reaction in equities to just a marginally better CPI print.
US CPI for the month of March was 5% compared to estimates of 5.2%. US equities jumped in the immediate reaction, before easing off.
March’s reading is materially lower than the 6% rise in prices in the year to February and will make the next monetary policy decision a tough one.
The problems faced by central banks have been well documented and today’s data will not make their job any easier.
Numerous commentators are keeping financial media alive with talks of a US recession while the IMF has again highlighted the slow pace of UK growth. Indeed, the IMF predicts the UK economy will contract in 0.3%.
Such a negative economic outlook would not usually be conducive for higher interest rates. However, a US CPI reading of 5% means central banks still have to act to control prices. This could make the economic picture worse.
The horrible truth is the Fed needs a recession to control inflation. Nonetheless, equity markets are largely ignoring this earnings-eroding scenario, for now.
Centrica
Centrica was among the FTSE 100’s top risers again on Wednesday as the utilities company benefited from the defensive nature of their business and elevated energy prices.
BT was the FTSE 100’s top riser, gaining 1.8%, as their quiet rally took the stock to the highest level since August.
Ocado was the top faller, down 2.6%, as traders booked profits