he Bank of England’s monetary policy committee takes centre stage today after counterparts at the Federal Reserve last night appeared to put America on standby for a tapering of economic support from November.
Half of the Fed’s 18 policymakers also expect the first increase in interest rates to take place in 2022. Investors will now be looking at comments from the Bank of England, which concludes its monetary policy meeting at noon today.
The FTSE 100 index, meanwhile, has opened higher after rallying sharply yesterday on the back of indebted Chinese property firm Evergrande promising to meet a debt repayment.
There are also updates from Royal Mail and consumer goods giant Reckitt Benckiser, as well as from the pubs sector with Mitchells & Butlers and City Pub Group.
Live updates
Rolls leads FTSE 100 higher
The recovery for the FTSE 100 index after Monday’s China-led wobble has continued, with the top flight up another 0.5% after gains of more than 1% in the previous two sessions.
Oanda’s senior market Jeffrey Halley said the momentum for global markets highlighted the TINA effect — There Is No Alternative — where shares remain attractive due to poor returns on cash and government bonds.
He said: “With interest rates at rock bottom globally and zero in much of it, even a 2% yield on a half-decent stock look attractive.”
The FTSE 100 was 29.68 points higher at 7,113.05, led by gains of 2% for Rolls-Royce and GKN owner Melrose Industries as sentiment towards the aerospace industry continues to improve. Royal Mail also cheered 1.5% after overall revenues in the five months to August increased by 8.2% year-on-year and by 17.7% versus 2019.
Roofing specialist Marley confirms London float plan
One of the UK’s biggest manufacturers of roofing tiles has confirmed plans to float in London, at a time when new housing is in high demand.
Marley, which was founded in the 1920s in Kent and makes products from five factories, expects to start trading on the main market next month. Market sources estimate the move could value the business at around £600 million.
The company is working with Jefferies, Peel Hunt and Panmure Gordon on the float.
Read the full story HERE.
Bank to continue waiting game
The Bank of England monetary policy committee is expected to vote 9-0 in favour of leaving interest rates unchanged, with the City more interested in how many members want to unwind the quantitative easing programme.
At the previous meeting, there was only once voice calling for a pull back on the mass purchase of government bonds.
The language used by the Bank will be closely watched, particularly whether the committee still thinks that the uplift in inflation is “transitory” after August’s figures showed the biggest spike on record and as energy prices have continued to rise ahead of the winter.
Hargreaves Lansdown analyst Susannah Streeter said the Bank of England is likely to continue to play a waiting game.
She said: “Members know full well that the economy needs to be weaned off the drug of cheap money, not least to give them options to treat any future crises and to keep a lid on inflation.
“But an interest rate rise any time soon, could tip many borrowers over the edge and into more debt, and put a further break on recovery. Already consumers were faced with rising prices in the shops, but now energy hikes are on the cards as soaring gas prices lead to the collapse of smaller cheaper providers.”
FTSE 100 steady after Fed meeting
Investors appear to be taking last night’s US Federal Reserve meeting in their stride, with the FTSE 100 index tipped to open slightly higher after the Dow Jones Industrial Average finished up by 1% last night.
CMC Markets is calling the FTSE 100 to start 20 points higher at 7,103, having jumped 1.5% yesterday to above where it was prior to Monday’s, when contagion fears linked to the debt crisis at property firm Evergrande led to a sharp sell-off.
Few were surprised by last night’s statgement from the Fed that if progress continues broadly as expected “a moderation in the pace of asset purchases may soon be warranted”.
Unless next month’s payrolls report is particularly bad, economists expect tapering will be announced in November with the potential for the process to be completed by the middle of 2022.
The number of Federal Reserve members who saw the potential for a rate rise in 2022 has gone from seven in June to nine yesterday, meaning the committee is evenly split in a big shift from the pro-2023 stance earlier this year.
Credit: Source link
