FTSE-100 set to drift as traders await key speech from Federal Reserve chief Jerome Powell at Jackson Hole
The FTSE-100 was set for a listless session today ahead of the key annual speech from Federal Reserve chairman Jerome Powell at the annual Jackson Hole conference.
Some increasingly upbeat looking data on the US economy last night should keep European shares from falling too far today, but they were not enough to stop the FTSE-100 from slipping a slight 18.21 points to 6027.39 in early trading.
Powell tonight may use his set-piece speech to signal a move to what is known as Average Inflation Targeting, rather than simply aiming at a central 2% inflation goal when setting interest rates and monetary policy. The move would see the Fed tolerate periods of sub- or above 2%.
Such a move would probably result in interest rates staying lower for longer - boosting share prices - as the central bank allows the resulting inflation to pick up without acting against it.
So widely expected is this signal in Powell's speech that anything less could destabilise the markets.
However, some economists say Powell may say the bank will simply replace the 2% goal for a range of 1.5% to 2.5%. The question investors will be scratching their heads about is whether that would lead to higher or lower pressures on rate rises. Given the recent run of inflation it would probably not make a huge amount of difference, but economists will be to judge on how to advise their clients on that.
Elsewhere beyond this major shift in US monetary policy, HSBC shares could come under pressure after the US accused it of aiding the Chinese crackdown on pro-democracy supporters in Hong Kong. It emerged that the bank froze the accounts of Jimmy Lai, a high profile pro-democracy campaigner and newspaper publisher arrested this month under the controversial new security laws in Hong Kong. Accounts held by Lai and other executives at his Next Digital newspaper group were frozen by the lender, leading to harsh criticism of its actions by the US last night.
Tensions at HSBC between its business model of serving both Asian and western markets have long been a concern for some investors and the share price could come in for some weakness in the coming days. Shares fell 2% in London this morning, pulling down the FTSE-100 thanks to its huge weighting on the index.
Rolls-Royce was also a drag after its heavy losses pulled down markets. Shares in the group fell 8% following news of its £5.4 billion loss.
Ad giant WPP leaped 4% as investors welcomed its return to the dividend payers' list after suspending payouts in March. Losses were huge for the half year after a host of writedowns but management appeared somewhat more optimistic about new business wins.
Centrica fell 1% after having to pay out £1.7 million in compensation and other fines after botching changes to its pre-payment meters for the UK's poorest households.
Overall, though, the tide of corporate action on mergers, acquisitions and even flotations continues apace with online retailer, The Hut Group today expected to launch a £4.5 billion stock market flotation which will see founder Matthew Moulding awarded shares worth £700 million if the market capitalisation hits £7.25 billion in two years.
The aggressive target is expected to make investors more incentivised to back the float of the company famed for its Myprotein nutrition brand and websites including Glossy Box and Look Fantastic.
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