FTSE 100 outlook: US inflation fears subside, London stocks rise

  • FTSE 100 up from 6,963.33 to 7,047.01
  • Missed US retail sales have little impact on London stocks
  • The Federal Reserve is not yet ready to raise US interest rates
  • Ready to trade the FTSE 100 index? Open an account today

After a tumultuous week, the FTSE 100 index ended the week 83.68 points higher than Thursday’s figures, mainly supported by news across the Atlantic. A murderous week for traders saw London stocks close Friday’s trading session in the dark, after seeing the price of the FTSE 100 drop 293 points in the first four days of trading.

FTSE 100: Why are investors buying the recent drop in the index this week?

The week has been rather bearish for most of the major indexes, in large part due to growing fears that inflation will rise out of control in the United States. The FTSE 100 and many other major European and Asian indices fell earlier in the week as investors feared central banks could panic and start raising interest rates or slowing quantitative easing plans.

US inflation has indeed fallen from 2.6% in March to 4.2% in April. A rise in interest rates would not be in the best interest of FTSE 100 companies, as the cost of issuing the financing would increase. Since many FTSE 100 companies are already in debt, this would put undue pressure on companies still struggling to come out on the other side of the Covid-19 pandemic.

U.S. retail sales and interest rate data remains stable

U.S. Federal Reserve Governor Christopher Waller has confirmed that despite the short-term rise in inflation, interest rates will not rise until policymakers see inflation stay above l ‘goal for a considerable period. Waller has hinted that the Federal Reserve will bide its time over the next few months to wait and see if this is just a temporary “lag.”

The FTSE 100 did not appear unduly concerned with today’s US retail sales data, which missed expectations and remained stable month over month. The consensus was expecting at least a 1% month-over-month increase, after rising 9.7% in March following a much needed government stimulus.

Some of the mid-morning gains of the FTSE 100 were also driven by the announcement of Amazon’s decision to create 10,000 new jobs in the UK, investing £ 10million over the next three years to train thousands of new employees in a vote of confidence for retail and e-commerce in Britain. sectors.

However, the FTSE 100 futures market may also factor in any uncertainty surrounding the emergence of the Indian variant Covid-19, which appears to have spread rapidly in the North West of England over the past fortnight. . Any weekend report of delays in easing the June 21 lockdown or localized restrictions from Covid-19 could see the FTSE 100 start next week on the wrong foot, with a return below 7,000 away from be impossible.

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