FTSE 100 Live December 16: Bank of England interest rate decision, impact on UK inflation, US Federal Reserve meeting, Boohoo warns against trading
Whether or not to raise interest rates from their pandemic 0.1% low will be revealed by the Bank of England at noon.
Yesterday’s skyrocketing inflation rate to 5.1% intensified pressure on policymakers to act, but most economists expect them to stay tight for another month in due to the economic uncertainty caused by the spread of the Omicron variant.
Counterparts at the U.S. Federal Reserve have already signaled three rate hikes next year, but Wall Street markets rose again last night despite the hawkish tone at the central bank policy meeting.
Elsewhere, online fashion retailer Boohoo lowered its profit forecast today as it blamed the disruption caused by the pandemic for driving up costs and lengthening delivery times for international customers.
Boohoo lowers full-year sales forecast, pushing shares down
Fashion company Boohoo has warned that pandemic disruption is hitting the business, prompting it to lower its sales forecast for the full year.
Shares fell 11%, or 15.25p, to 122.6p early in trading after the AIM-listed retailer reported a number of headwinds it was struggling with.
Transportation costs have increased due to supply chain disruptions across the industry and extended delivery times that have impacted international demand.
Tech stocks rise FTSE 100, Boohoo down 16%
The FTSE 100 index is up more than 1% as financial markets continue to welcome the Federal Reserve’s decisive stance on inflation.
The first category added 80.14 points to 7,252.32, led by tech-focused stocks relieved that US bond yields remained firm despite the prospect of a three-fold rise in US interest rates. ‘next year.
Alibaba and Tesla investor Scottish Mortgage Investment Trust added 3% and cybersecurity firm IA Darktrace rose 4% to the top of the FTSE 100 index. FTSE 250 index focused on the domestic market Also climbed 1%, led by Domino’s Pizza after its shares jumped 20% following a long-awaited agreement with its franchisees regarding future growth plans.
The main interest outside of the FTSE 350 index was in Boohoo stocks after its earnings warning.
The fast fashion retailer fell 16% on AIM after warning that sales growth would be between 12% and 14% instead of the 20% to 25% of its previous forecast. Shares of rival ASOS also fell 5%.
The Fed’s progress is seen as positive for equities
The calm reaction from financial markets last night represents success for the Federal Reserve in managing expectations of a potential three rate hikes in 2022.
This does not mean, however, that investors should expect smooth developments as policymakers implement their plans to tighten monetary policy.
Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, said: “While volatility is to be expected, we believe that a still accommodating political environment, as well as strong economic and corporate fundamentals, should support a further rise in equities.
“We favor the likely winners of global growth, including energy and finance, balanced with exposure to more defensive sectors like healthcare.”
Haefele also believes inflation will slow more than the Fed expects in 2022 and that this should ease the pressure on policymakers to act.
Markets climb despite the Fed’s hawkish tone
Global markets are in the spotlight today, despite the fact that policymakers at the U.S. Federal Reserve reported three interest rate hikes in 2022.
The more hawkish tone in response to the threat of rising inflation did not scare Wall Street as the Dow Jones Industrial Average closed more than 1% higher. Japanese stocks followed the rally adding 2% and the FTSE 100 index is expected to rise 80 points to 7,250.
Attention is now turning to the meetings of the European Central Bank and the Bank of England, with the latter due to keep rates unchanged despite the November inflation rate surging to 5.1%.
Michael Hewson, chief market analyst at CMC Markets, said: “The United States faces similar Omicron challenges to the United Kingdom, but the Fed has been able to deliver a clear and concise message, a problem with which the Bank of England has always struggled. “
He said the bank’s monetary policy committee “bottled up” the decision to hike rates by 0.15% in November, a move that would have been easy for the market to absorb and would have allowed policymakers to fail. take no action today.
Unemployment figures have been robust since then and inflation is now close to its highest level since 1992. However, further restrictions and a slowdown in economic activity due to the Omicron variant mean that most economists believe that the Bank will continue its wait-and-see approach. .
Hewson added, “If today’s decision was based on data alone, which it ultimately should be, a rate hike wouldn’t even be up for debate. “