FTSE suffers after Yellen spooks markets

The FTSE 100 has opened in the red this morning, losing 50 points, weighed down by last night’s Federal Open Market Committee meeting.

Sometimes all it comes down to is a single sentence. Janet Yellen will be pondering over her performance last night, after she spooked markets with talk of an earlier-than-expected rise in US interest rates. Although the Fed’s statement implied there would be a ‘considerable’ gap between the end of QE and the first rate hike, Yellen’s definition of considerable as ‘around six months’ wasn’t as long as some had hoped.

The upshot is that tightening jitters are abroad in markets once again; traders had hoped for a decent breathing space of around a year between the two events, but now June 2015 looks to be the starting point. Maybe Yellen is made of sterner stuff than her predecessor – it does look as if she is willing to stare down markets rather than being blindly carried along by events.

Retailer Next unveiled its now customary strong results, and it has surpassed M&S in profits for the first time. The recovery has been driven by consumer spending, and Next has done well out of this. Usually the shares pop by more than the 1.5% we’re seeing this morning, but the cautious outlook is keeping gains in check. Still it’s proven unwise to stand in the way of the Next share price over the last five years, even if £68 is still the level to beat.

Quiet has descended on the insurance sector after yesterday’s carnage, but it is unlikely to stay at rest. It is now up to the companies concerned to prove they’re not permanently hobbled by the annuities change in the Budget, and to convince investors that they’re still a worthwhile proposition.

It’s a busy afternoon for economic data in the US, with jobless claims, existing home sales and the Philly Fed all on the list. But the main effort will be concentrated in further parsing of the Fed statement. Ahead of the open, we expect the Dow Jones to start 25 points lower at 16,198. 

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.