UK’s FTSE 100 hit fresh a two-month peak on Tuesday, as investors awaited U.S. inflation data to gauge the pace of interest rate hikes, while shares of Abrdn fell after the asset manager posted lacklustre half-yearly numbers.
The blue-chip index inched up 0.1% to close at its strongest level since June 9. Oil stocks such as BP and Shell gave the biggest boost as crude prices rose after Russia said oil exports to parts of central Europe since early this month has been suspended.
Global markets slipped ahead of Wednesday’s inflation data, with investors waiting to see if the U.S. Federal Reserve might dial down its fight against inflation and provide a better footing for the economy to grow.
“When the economy rolls over, then you might see the CPI come lower. I don’t see much optimism on the horizon,” said Keith Temperton, sales trader at Forte Securities.
While stock markets have bounced from their mid-June lows, aided by a better-than-expected earnings season and retreat in commodity prices, investors are questioning if the rally can sustain as economic conditions deteriorate.
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The Bank of England will probably have to raise interest rates further from their current 14 year-high to tackle inflation pressures that are gaining a foothold in Britain’s economy, BoE Deputy Governor Dave Ramsden told Reuters.
Still, the UK blue-chip index has outperformed its global peers this year, helped by exposure to rate-sensitive bank stocks and commodity-linked shares,that have benefited from a surge in oil and metal prices this year.
The FTSE 100 index is up 1.4 so far this year, compared with a early 15.5tumble for the MSCI world equity index during the same period.
“We continue to rate the UK as most preferred and see a modest 4% upside, targeting the FTSE 100 at 7,700, by end-2022,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
“However, we recommend broad-based exposure to the UK equity market as we believe that sector leadership will be more mixed in the coming months.”
Abrdn dropped 6.8% after reporting a lower-than-expected profit, pressured by global market turbulence amid geopolitical tensions and broadening inflationary pressures.
The midcap index fell, with office rental firm IWG tumbling 11.4% after disappointing first-half results due to inflationary woes and COVID-related restrictions in Asian markets.
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