London’s FTSE 100 edges higher ahead of central bank rate announcements

London’s FTSE 100 slid yesterday, driven by traders bracing for a big week of central bank announcements.

The capital’s premier index dropped 0.64 per cent to reach 7,190.16 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, slumped 1.48 to 18,519.69 points.

The world’s biggest central banks are set to sign off even more steep interest rate hikes this week as they continue their fight against roaring inflation.

Tomorrow, the US Federal Reserve is expected to raise borrowing costs at least 75 basis points, which would be the third such move in a row.

The Fed has already lifted rates 225 basis points since March, the quickest tightening cycle since the 1980s.

On Thursday, the Bank of England may follow suit, but the City thinks a 50 basis point lift is the most likely outcome, taking rates to 2.25 per cent.

Sweden’s central bank this morning shocked markets by sending rates a whole percentage point higher, the biggest rise in at least three decades.

Higher interest rates tend to weigh on stocks by making bonds more attractive and knocking investors’ valuations.

London’s FTSE 100 is exhibiting signs of stagnation, analysts said.

“The FTSE is totally rangebound – it’s barely moved either side of 7,000 and 7,500 for at least a year now and is showing little real momentum,” Neil Wilson, chief market analyst at Markets.com, said.

FTSE 100 YTD has been rangebound

Financials led the FTSE 100 higher driven by traders betting on another big rate rise by the Bank this week.

High street lenders HSBC and Lloyds all hovered near the top of the premier index.

The mid-cap FTSE 250 was dragged down by publisher Future tumbling over 17 per cent.

The pound continued its slide against the US dollar, weakening around 0.5 per cent.

Oil prices slid over two per cent.