London’s FTSE 100 was on course for its second losing week in a row today as fears over the US Federal Reserve slowing the pace of money-printing lingered in City dealing rooms.
The blue-chip benchmark has not suffered two successive losing weeks since June when panic over the Fed wrapping up its $85 billion (£54.4 billion) quantitative easing programme and early rises in interest rates sent investors scurrying out of shares.
Upbeat data from America — notably jobless claims falling to a six-year low — has heightened expectations that the Fed’s rate-setters will begin tapering its stimulus programme in September, creating jitters in equity markets on both sides of the Atlantic. The FTSE 100, down 3.53 to 6479.65 today, is on course for 2% fall this week amid light summer trading volumes.
The UK’s cost of borrowing in debt markets lingered near two-year highs today with yields on 10-year gilts at 2.67%. Despite Bank of England Governor Mark Carney’s guidance on interest rates last week — which suggested it could be three years before official borrowing costs rise — money markets are pricing in a much earlier rate hike in 2015 after a raft of much better news on the economy. The pound remained close to two-month highs above $1.56.
One trader said: “The markets are clearly saying that they don’t believe the Bank, which is a problem for Mark Carney. But even for the hawks on the MPC a rate rise in February or March 2015 looks a little bit gooey.”