The FTSE 100 is expected to snap its winning streak on Thursday, as global sentiment cooled following the US Federal Reserve’s cautionary outlook on future rate cuts.
London’s blue-chip index is called 10 points lower in early futures trading after closing 59.4 points higher at 9,756.1 on Wednesday — extending a run that has lifted the benchmark over 400 points (4.3%) since the end of last month.
As anticipated, the Federal Reserve delivered a 25-basis-point rate cut, but also announced it will end quantitative tightening (QT) from 1 December, opting to reinvest maturing Treasuries rather than allow them to roll off.
However, Fed Chair Jerome Powell tempered investor optimism, warning that “a further reduction of the policy rate at the December meeting is not a foregone conclusion.” The remarks surprised traders who had priced in a 90% chance of another cut, sending the US two-year Treasury yield up 13bps to above 3.60% and briefly knocking Wall Street stocks.
The Dow Jones slipped 0.16%, the S&P 500 edged down 0.004%, while the Nasdaq bucked the trend, climbing 0.55% to close just below 24,000 — another record high.
Market analyst Ipek Ozkardeskaya of Swissquote said Powell’s comments “hurt sentiment” but boosted the US dollar on a “hawkish readjustment in Fed expectations,” adding that other major currencies — notably sterling — could come under pressure in the weeks ahead amid UK budget concerns.
In Asia, the USD/JPY continued higher, touching 153, after the Bank of Japan left its policy rate unchanged but reaffirmed its commitment to gradual normalisation. Regional equities were mixed, with Japan’s Nikkei barely in positive territory and the Shanghai Composite down 0.7%, one of the region’s weakest performers.
Attention now turns to Europe, where the European Central Bank (ECB) is widely expected to keep rates unchanged at today’s policy meeting.
