MARKET REPORT: Looming rate rises pose a threat to market rally

MARKET REPORT: Looming interest rate rises pose a threat to market rally as central banks continue fight to tame sky high inflation

Global stock markets made a sluggish start to the week amid investor concerns about looming interest rate hikes.

With the outlook for the global economy in focus, the FTSE 100 index edged up 0.3 per cent, or 19.72 points, to 7784.87 and the FTSE 250 dropped by 0.5 per cent, or 98.19 points, to 19937.2.

The main European benchmarks also struggled for direction with the Dax in Germany slipping 0.2 per cent and France’s CAC index was also down by 0.2 per cent.

Inflation threat: With the outlook for the global economy in focus, the FTSE 100 index edged up 0.3% to 7784.87 and the FTSE 250 dropped by 0.5% to 19937.2

On Wall Street, meanwhile, the Dow Jones Industrial Average inched down 0.2 per cent, the S&P 500 dropped 0.8 per cent and the Nasdaq fell 1.3 per cent. 

Traders will be keeping a close eye on how central banks around the world pursue interest rate hikes this week.

The US Federal Reserve is expected to declare a smaller rate hike of 0.25 percentage points on Wednesday having already pushed through a string of 0.5 percentage point and 0.75 percentage point hikes.

Meanwhile, the European Central Bank (ECB) and Bank of England are likely to usher in rises of 0.5 percentage points on Thursday.

This would take the UK’s interest rate to 4 per cent, helping those with savings but sparking further unease for mortgage borrowers.

With central banks still raising rates as they battle to tame sky high inflation, analysts suggested the rally on global stock markets so far this year could soon grind to a halt. 

Eric Robertsen, global head of research and chief strategist at Standard Chartered, said: ‘Expectations for a Goldilocks scenario are too hopeful.’

Stock Watch – Impellam

Impellam, the recruitment firm which helps professionals such as doctors, lawyers and teachers to find work, has agreed to sell two of its businesses for £85million.

The company will sell its regional specialist staffing and healthcare businesses to investment fund Twenty20 Capital. 

Impellam plans to reward investors with a special dividend of 77.7 pence per share – or £35million – following the disposals.

Shares rose 7.1 per cent, or 47.5p, to 720p yesterday.

A Goldilocks economy is one that is neither too hot nor too cold and grows steadily without stoking inflation.

Back in London, the new boss of Shell wasted little time in imposing his mark on the oil giant.

Wael Sawan, who took over from Ben van Beurden earlier this month, authorised the merger of Shell’s oil and gas production and liquified national gas (LNG) divisions. The company will also combine its renewables operations and oil refining and marketing business. 

The changes will see the size of the oil giant’s executive committee reduce from nine to seven members. Shares gained 0.2 per cent, or 4.5p, to 2375p.

Housebuilders, meanwhile, traded lower after the Government set a six-week deadline for developers to sign ‘legally binding contracts’ and commit to paying to repair unsafe buildings.

The contract will see developers pledge at least £2bn for repairs to buildings developed or refurbished over the past 30 years.

Those who fail to sign and follow the contractual terms will face ‘significant consequences’, the Government added. The sell-off across the industry hit Crest Nicholson hardest, which fell 2.9 per cent, or 7p, to 237.8p.

Rivals Taylor Wimpey dipped 1.8 per cent, or 2.1p, to 116.7p and Barratt Developments sank 1.8 per cent, or 8.5p, to 457.4p.

Computacenter rose highest in the second tier after a record fourth quarter. The upbeat result was driven by ‘extremely buoyant’ sales across its technology sourcing business. 

Revenues for 2022 were 30 per cent higher than the previous 12 months. Shares surged 11.4 per cent, or 226p, to 2218p.

Darktrace shares crashed to a record low after the asset manager Quintessential disclosed a short position in the cyber-security firm. Shares tumbled 12.6 per cent, or 31.8p, to 220p.

Investors in On The Beach made their feelings known with a revolt at the package holiday group’s annual general meeting on Friday. More than one in five votes cast were opposed to its remuneration policy. 

Shares fell 1.8 per cent, or 3.2p, to 178.4p.