FTSE 100 down ahead of BoE rate hike

The UK market was shaken by the release of data showing UK inflation was higher than expected in February. It reached 10.4% year-on-year, while 9.9% was expected. Core inflation also topped estimates at 6.2% vs 5.7%. This raised the odds of a rate hike today by the Bank of England. It is widely expected to increase rates by 25 basis points to 4.25%.

The yield on 10Y Gilts gained 9bps on Wednesday at the close. The FTSE 100 added 0.4%.

Overnight, the U.S. central bank raise its rates by 25 basis points, as expected. Fed Funds are now between 4.75 and 5%. They are close to the theoretical peak rate envisaged by the Fed, i.e. 5.125%.

Janet Yellen, the head of the U.S. Treasury, explained last night that the authorities refused to provide a comprehensive guarantee on deposits in response to the banking crisis that is currently shaking the markets.

The FTSE 100 was down 0.6% this morning, with stocks that are sensitive to interest rates underperforming today, including real estate stocks such as Schroders and Pearson.

Meanwhile, West Africa-focused Endeavour Mining rose 2% after an increase in the price of gold.

 

Things to read today:

‘Close to thin ice’: looming credit crunch puts pressure on Fed (Financial Times)

SNB Hikes by 50 Basis Points After Credit Suisse Turmoil (Bloomberg)