FTSE higher despite rate hike and US tech sell-off

“The Bank of England surprised everyone by hiking interest rates yesterday. In doing so it only confirmed new Governor Andrew Bailey’s reputation as an ‘unreliable boyfriend’ after he flirted with a widely expected rise back in November before thinking twice, but the market seems to be taking this latest development in its stride,” says AJ Bell Investment Director Russ Mould.

“While the decision to move now seems at odds with the uncertainty around the economic impact of the Omicron variant, and rising rates are not typically good news for stocks, businesses and markets don’t love uncontrolled inflation either so the Bank of England at least trying to get a handle on things isn’t all bad news. It was not a complete surprise then to see the FTSE 100 made a decent fist of things on Friday.

“It was a tale of two central banks on Thursday as the European Central Bank, by contrast, kept its powder dry and maintained a wait and see policy.

“This follows on from the US Federal Reserve’s well-received decision to take a balanced approach on monetary policy earlier in the week.

“However the Fed’s guidance for three rate hikes in 2022 wasn’t good news for everyone. Higher rates are typically seen as diminishing the relative attractiveness of expensive tech stocks, leading to a sell-off on the Nasdaq index overnight.

“November retail sales in the UK were strong, supported by early Christmas shopping but there was little sign of listed retailers catching a break, with investors unsurprisingly seeing this as yesterday’s news given the impact of Omicron on the high street.

“Rentokil was the top riser on the FTSE 100 index 24 hours after having its credit rating reaffirmed in the wake of the recently announced multi-billion-pound acquisition of US rival Terminix. Shareholders will take some reassurance that the company hasn’t overstretched itself with the deal.”

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