MARKET REPORT: Looming interest rate hikes threaten market recovery as central banks continue to struggle to rein in soaring inflation
Global equity markets started the week slow due to investor concerns over impending interest rate hikes.
With the outlook for the global economy front and center, the FTSE 100 index edged up 0.3%, or 19.72 points, to 7784.87 and the FTSE 250 fell 0.5%, or 98.19 points, to 19937.2.
Major European benchmarks also struggled to orient themselves with the Dax in Germany down 0.2% and the CAC index in France also down 0.2%.
Inflation threat: With the outlook for the global economy front and center, the FTSE 100 index edged up 0.3% to 7784.87 and the FTSE 250 fell 0.5% to 19937.2
On Wall Street, meanwhile, the Dow Jones Industrial Average edged down 0.2%, the S&P 500 fell 0.8% and the Nasdaq 1.3%.
Traders will be watching closely how central banks around the world continue their interest rate hikes this week.
The U.S. Federal Reserve is expected to declare a smaller rate hike of 0.25 percentage points on Wednesday after already pushing through a series of 0.5 percentage point and 0.75 percentage point hikes.
Meanwhile, the European Central Bank (ECB) and Bank of England are expected to usher in 0.5 percentage point hikes on Thursday.
This would take the UK interest rate to 4%, which would help savers but cause further discomfort for mortgage borrowers.
As central banks continue to hike rates as they struggle to rein in soaring inflation, analysts have suggested the rally in global equity markets so far this year may soon come to a halt.
Eric Robertsen, global head of research and chief strategist at Standard Chartered, said: “Expectations for a Goldilocks scenario are overly optimistic.”
Stock Watch – Impellam
Impellam, the recruitment firm which helps professionals such as doctors, lawyers and teachers find work, has agreed to sell two of its businesses for £85million.
The company will sell its regional specialist recruitment and healthcare businesses to investment fund Twenty20 Capital.
Impellam plans to reward investors with a special dividend of 77.7p per share – or £35million – following the disposals.
The shares rose 7.1%, or 47.5p, to 720p yesterday.
A Goldilocks economy is one that is neither too hot nor too cold and is growing steadily without fueling inflation.
Back in London, the new boss of Shell was quick to impose his mark on the oil giant.
Wael Sawan, who took over from Ben van Beurden earlier this month, cleared the merger of Shell’s oil and gas and national liquefied gas (LNG) production divisions. The company will also combine its renewable energy activities with its oil refining and marketing activities.
The changes will see the size of the oil giant’s executive committee drop from nine to seven members. The shares gained 0.2%, or 4.5p, to 2375p.
Homebuilders, meanwhile, traded lower after the government set a six-week deadline for developers to sign ‘legally binding contracts’ and pledge to pay to fix unsafe buildings.
The contract will see developers commit to paying at least £2billion for repairs to buildings developed or refurbished over the past 30 years.
Those who do not sign and fail to comply with contract terms will face “significant consequences”, the government added. Selling across the industry hit Crest Nicholson the hardest, which fell 2.9%, or 7p, to 237.8p.
Rivals Taylor Wimpey fell 1.8%, or 2.1p, to 116.7p and Barratt Developments fell 1.8%, or 8.5p, to 457.4p.
Computacenter moved up to second after a record fourth quarter. The upbeat result was driven by “extremely buoyant” sales across its technology supply business.
Revenue for 2022 was 30% higher than the previous 12 months. Shares jumped 11.4%, or 226p, to 2,218p.
Shares of Darktrace slumped to an all-time high after asset manager Quintessential disclosed a short position in the cybersecurity firm. The shares fell 12.6%, or 31.8p, to 220p.
Investors in On The Beach made their feelings known as they rioted at the package holiday group’s annual general meeting on Friday. More than one in five votes cast opposed his compensation policy.
The shares fell 1.8%, or 3.2p, to 178.4p.
