On Friday, steady yet slow buying activity was observed in London’s leading index ahead of Fed Chair Powell’s much-anticipated speech at the Jackson Hole Symposium.
The FTSE 100 remained steady as the Fed Chair delivered his speech, proclaiming the ‘time has come for policy to adjust’ confirming the Federal Reserve is about to start cutting interest.
“The Fed finally pivoted away from its role as staunch inflation fighter back to its default position as facilitator of economic growth,” said George Lagarias, chief economist at Forvis Mazars.
“Mr Powell’s remarks on rising unemployment left no question as to the Fed’s intention to cut rates this year.”
The Jackson Hole Symposium is one of the biggest events on the financial calendar because it has the potential to move markets. It doesn’t always live up to expectations, but 2024’s instalment certainly did.
London’s tepid response on Friday was an outlier. The S&P 500 soared over 1% as Powell delivered his speech and was closing in on all-time record highs. US bond yields were sinking, and gold was breaking to fresh highs.
*FED'S POWELL: 'THE TIME HAS COME FOR POLICY TO ADJUST'
— zerohedge (@zerohedge) August 23, 2024
*POWELL: WE DON'T SEEK OR WELCOME FURTHER LABOR MARKET COOLING
*POWELL: MY CONFIDENCE HAS GROWN THAT INFLATION IS ON PATH TO 2%
The FTSE 100 has held its own this week, sticking very close to the 8,300 level. Friday saw the index above this level, but only by a few points.
A stronger pound against the dollar can be blamed for the FTSE 100’s muted response as the inverse relationship with the FTSE 100 sucked the life out of any attempt for UK stocks to follow the US higher.
Dollar weakness weighed on the FTSE 100’s many overseas earners and offset the general optimism around Powell’s speech.
JD Sports continued yesterday’s rally and broke to the highest levels since January with a 2%. Concerns about a guidance downgrade in the early days of 2024 are subsiding after the retailer released reasonably strong sales growth figures yesterday. JD Sport’s strong growth in North America will have helped the stock higher on Friday, with borrowing costs set to fall.
Melrose was the FTSE 100’s top faller after UBS analysts took an axe to their price target, cutting it from 770p to 400p. Melrose shares were down 8% at the time of writing.