FTSE lacking direction as investors hunt for clues on US rates, miners fall on underwhelming Chinese growth target

“Like a driver in a foreign country whose sat nav has packed up, the UK stock market was lacking direction on Monday morning,” says AJ Bell Investment Director Russ Mould.

“A recovery in US markets at the back end of last week helped create a slightly sunnier mood and dispel some of the clouds which had built up around US interest rates. But the market lacks an explicit steer on US rates until the Federal Reserve’s next rate decision meeting concludes on 22 March.

“Competing narratives around a pivot away from rate hikes and a soft landing for the US economy on the bull side, and sticky inflation and rates staying higher for longer than the market hoped will collide then. Whichever prevails could well define the direction of the market for the next few months at least.

“In the meantime investors will be scrabbling for all the clues they can find, with Fed chair Jerome Powell’s appearance before policymakers in Washington tomorrow and Wednesday an opportunity to get a read on the Fed’s thinking.

“Given non-farm payrolls for January gave the market a jolt by coming in way ahead of expectations, the latest figures this Friday will also be closely monitored.

“Mining stocks helped hold the FTSE 100 back at the start of the week – reflecting disappointment around China flagging a lower-than-expected 5% target for economic growth, and, with its customary lack of transparency, giving no details on how exactly it is going to get there.

“Oil prices were also lower on the 5% target, with resources stocks having priced in increased demand from a reopening of the Chinese economy which may now fall short of previous hopes.”

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