The FTSE 100 was trading in a holding pattern on Monday as markets geared up for a busy week of central bank action, including interest rate decisions from the Bank of England and the Federal Reserve.
London’s leading index was trading higher by just 1 point at the time of writing.
“There’s a wait and see mood at the start of the week as investors eye key central bank meetings and assess the potential path of interest rate cuts,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“Warnings about higher food prices coming in the UK are likely to cause fresh worries about how long borrowers will have to wait until Bank of England policymakers vote for another cut. They are set to leave the base rate unchanged on Thursday and aren’t expected to make a move until next Spring.”
Global equity markets have surged higher on hopes of an interest rate cut by the Federal Reserve. With a deterioration in the jobs market, the Fed has little choice but to cut interest rates, and the question traders will be asking themselves is not whether they cut, but by how much.
Some investment banks have called for a 50 bps cut, but this seems unlikely with the consensus pointing to a quarter-point cut.
The Bank of England is not expected to cut rates, but they have surprised the market before.
FTSE 100 movers
Sainsbury’s was the FTSE 100’s top riser after the group said it had turned down an approach for its Argos business unit.
“The firing gun has effectively been triggered on the sale of Argos. Sainsbury’s might have rejected an offer from Chinese retailer JD, but the fact it hasn’t come out and said the business isn’t for sale at any price is telling,” said Dan Coatsworth, investment analyst at AJ Bell.
“Sainsbury’s has talked up a food-first strategy for some time, implying that Argos wasn’t core to its long-term plans. The general merchandise business hasn’t been doing that well for a few years, and it always felt like Argos concessions were hidden away in the corner rather than being a prominent part of a Sainsbury’s store.”
Sainsbury’s shares were 6% as investors positioned for the potential future sale of Argos, which would allow the group to focus efforts on what it does best.
AstraZeneca and BT were both down more than 3% and were the top fallers on the day.
Housebuilders were among the gains as investors hoped for positive commentary from the BoE on Thursday and looked past soft data from Rightmove on house prices.
“Despite Rightmove data showing the first drop in house prices since the start of last year, housebuilders’ shares proved resilient, Mould said.
“The sector will be hoping the recent easing in gilt yields – which have a big impact on the mortgage market – is sustained.”