FTSE Pauses Ahead of All-Time High as Solid Jobs Data Buoys Sterling

The FTSE100 has been under pressure in recent months. It has lost almost 5 percent so far this year. However, investors are taking a wait and see approach after the Bank of England slashed its wage growth forecasts in its latest quarterly inflation report. While the FTSE may be having a tough time, it is still a relative outperformer in terms of global performance.

A strong opening on Wall Street on Monday helped fuel a rally. However, poor retail sales in the US revived fears of a recession. Inflation has also been on the rise. This is partly because of the cost of energy and goods and raw materials. Prices rose by almost 40 percent over a year ago. As a result, workers are getting slightly worse off in real terms.

Today’s FTSE100 was expected to open higher. Investors were looking for signs that a debt reduction plan is being pushed forward. However, the Chancellor has been unclear on when this will happen. He could do so at the end of the month, or earlier. Regardless, it’s important to watch for early signs of a pullback.

The Bank of England has announced its intention to purchase a number of long-dated gilts to help stabilise the market. Combined with weaker than expected manufacturing data, investors were encouraged by the news. Despite the announcement, UK bond yields remain low. At 3.87%, they are about a quarter of a percent below the benchmark FTSE100.

The latest jobs report in the United States is also important for British companies trading in US dollars. Job openings fell more than expected, according to JOLT figures. Overall, the economy is growing, though the unemployment rate remained high. On the bright side, the FTSE100 is down a modest 0.3% on Friday. Nevertheless, investors were hesitant to buy when the FTSE 100 dropped.

Some of the most interesting news came from the mining industry. Mining majors were hit by lower copper and zinc prices. They were also hit by the fallout from the conflict in Ukraine. Although investors are hopeful that warmer winter weather will alleviate concerns about an energy crisis, the reality is that the EU’s economic outlook remains uncertain.

The Bank of England also acted on its promise to buy up to PS5bn of gilts to help boost confidence and to keep interest rates at a reasonable level. However, the bank’s monetary policy decision was not a watershed one. Despite the government’s U-turns, sterling has weakened in recent weeks. For now, it is trading above its ten-week low against the dollar.

There is still a lot of confusion over the timing of a debt reduction plan. Many investors are unconvinced that it is being delivered on time. Others believe that the plan is coming sooner rather than later. One key to the debate is whether the debt reduction plan is a one-off event, or whether it is a policy aimed at gradually reducing the government’s borrowing. If this is the case, then a more gradual approach would be the most prudent.