Wall Street leaves FTSE floundering in its wake

The week is finishing with yet more gains for Wall Street, but in London more gains for sterling have put fresh pressure on the FTSE 100.

  • BoE doves morph into hawks
  • International firms hit hard
  • Nasdaq 100 tops 6000 as US gears up for FOMC next week

Bank of England policymakers seem almost in an indecent rush to issue pronouncements on why interest rates will start to rise soon. Gertjan Vlieghe became the latest dove to convert to the hawkish camp this morning, arguing that all the indicators pointed towards a need for higher rates. This notable shift in rhetoric continues to hurt the FTSE 100, with the index briefly moving below 7200 for the first time in months. The contrast with US indices, which are at all-time highs, cannot be starker, and with the strong seasonality of the fourth quarter (an average gain of 3.4% for the quarter over the past 15 years), some dip buyers will be wondering whether the Bank of England has just handed
 them a prime opportunity to pick up some bargains. Just as in the aftermath of Brexit, firms with big overseas operations were the ones to buy as sterling dropped, so today they have become the ones to be sold; however the FTSE 250 is not seeing a bounce, as might be expected, since there are real concerns that higher rates and the higher borrowing costs that go with them will continue to hit consumers, wiping out any benefit caused by the stronger pound bearing down on inflation.

The Nasdaq 100 has breached 6000 once again in the early part of the US session, and the S&P 500 is once again girding itself for a run at 2500. With each successive North Korean launch, the impact on markets has diminished. It will take more than a disgruntled dictator with delusions of grandeur to knock this market off its perch, even if that dictator is armed with nuclear weapons. Next week’s Fed meeting will be the focal point of the month, and while the Fed is unlikely to be as dramatic as the Bank of England was yesterday, there will nonetheless be plenty of attention on the likely path of rates into year-end.

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