FTSE 100 spooked by prospect of rate hikes as US stocks dip

The FTSE 100 tracked US equities lowered on Thursday after the Federal Reserve released minutes suggesting markets should prepared for a number of rate hikes in 2022.

US technology shares were particularly heavily hit by the announcement driving notable downside in the S&P 500 and DOW due to their significant weighting in US indices.

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“The Federal Reserve continues to wield considerable power over global markets and its latest comments are not what investors want to hear,” says Russ Mould, investment director at AJ Bell.

“Minutes from its latest monthly meeting implied that a tight jobs market and ongoing inflation could result in a more aggressive change in monetary policy with interest rates going up sooner than expected.”

“As a result, tech stocks have been heavily sold down, including a 3.3% decline in the tech-heavy Nasdaq index last night on Wall Street. A lot of tech companies trade on high valuations with the hope of large profit growth in the future rather than today, and these types of stocks are very sensitive to rising rates.”

The decline in the FTSE 100 masked a number of positive updates from UK corporates including retailer Next. Next raised their outlook for the year ahead after a strong festive trading period. Indeed, they felt sufficiently confident to return cash to investors in the form of a special dividend, despite concerns over rising costs.

“For all the tales of woe on the high street, there is one shining jewel to be found in the form of Next. There aren’t many bricks and mortar retailers dishing out special dividends or upgrading guidance multiple times over,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

Greggs also released a bumper trading update and reported £1,230m sales in 2021, up from £811m in 2020 and £1,168m in 2019. However, Greggs results were overshadowed by the departure of their CEO.

“The big news and overshadowing another solid earnings performance is long-time CEO Roger Whiteside is retiring, to be replaced by retail and property head Roisin Currie,” explained Joshua Raymond, Director at financial brokerage XTB.

“Given the fantastic growth of the Greggs brand under Whiteside’s leadership, its no surprise to see some instability in the share price this morning, which trades lower by 2%.”

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