- Politburo follows Chinese central bank with efforts to lift flagging economy
- But lower oil prices weigh on the FTSE 100, limiting blue-chip gains
- US inflation data later today to offer guidance on Fed interest rate policy
The FTSE 100 looked set to cap a week of gains on Friday as global markets moved higher on hopes of further looming interest rate cuts and a major Chinese stimulus package.
The blue-chip index inched higher at the open, following continued outperformance of Asian markets over night and ahead of crucial US inflation data later in the day, and taking weekly gains to almost 1 per cent.
It means the FTSE 100 is roughly 1.8 per cent behind an all-time-high of 8,445.8 set on 15 May, when expectations the Bank of England would move ahead with its first base rate cut ahead of the US Federal Reserve combined with weaker sterling to boost exporters.
City awaits crucial US inflation data as bumper Chinese stimulus measures lift global markets
Politburo leaders on Thursday announced they would beef up ‘necessary fiscal spending’ to help meet the world’s second-largest economy’s annual growth target of 5 per cent.
It follows a period of deterioration of economic data, sparked by crises within China’s enourmous property sector.
Government intervention comes after China’s central bank pulled the trigger on stronger than expected monetary stimulus measures on Tuesday, including interest rate cuts and the easing of some mortgage rules.
This has driven China’s CSI 300 and Hong Kong’s Hang Seng indices 14.5 and 13.5 per cent higher, respectively, since market close on Monday.
The impact on the FTSE 100 has been limited so far, largely as a result of lower oil prices weighing on the index, with brent crude now trading at $71.72/barrel having fallen by more than 24 per cent over the last year.
However, the FTSE 250 has benefited from China exposed constituents like Burberry and Prudential.
Richard Hunter, head of markets at Interactive Investor, said: ‘There will of course be a time lag between the announcement of the stimulus package and its effects washing through to the economy, but the very fact that the authorities have moved away from their previous inertia has energised both domestic and international markets alike.
‘Chinese blue chips…[are at their] highest since around the time of the global financial crisis in 2008, while the positive reverberations have extended to most commodity prices and sectors with a high Chinese exposure worldwide.’
Markets will also be keeping a close eye on fresh global economic data out today, with eurozone figures set to be followed by an all-important US inflation print.
The eurozone data paints a mixed picture, with French consumer prices rising less than expected, Spanish inflation easing to 1.7 per cent and German unemployment growing slightly beyond forecasts. Equity markets across the bloc were up in early trading.
US core personal consumption expenditures (PCE) price index figures – the Fed’s preferred measure of inflation – are due this afternoon, with markets hoping for guidance on the outlook for interest rate policy.
PCE is expected to have risen by between 0.1 and 0.2 per cent last month.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: ‘Any significant rise above that range could dampen the prospects of further rate cuts by the Fed whose current forecast suggests another half point reduction by the end of 2024.’
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