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FTSE 100 set to fall as traders fret over UK inflation and interest rates

·2-min read
<p>Air fares have risen but shop prices remain muted</p> (PA Archive)

Air fares have risen but shop prices remain muted

(PA Archive)

The FTSE 100 was set to tumble today while bitcoin also slumped below $40,000.

All eyes today in London were on this morning’s inflation numbers for April which could set the trend for the rest of the session.

Concerns about rising prices has led to many a major stock sell-off in recent weeks as investors position themselves for when the Bank of England begins tapering off its support for the economy through quantitative easing and near-zero interest rates.

So far, while transport prices have risen, there have been few signs of food price rises or other core goods, but economists expect to see inflation move up as the year progresses and demand for goods and services from the public picks up.

In March, headline CPI came in at 0.7% while core prices rose to 1.1%

Economists expect that to jump to 1.5% and 1.3% respectively.

As CMC Markets said in a note to clients today: “That’s still some way short of the Bank of England’s inflation target of 2%, however the speed of the move might suggest that we could be at 2% in fairly short order, and potentially by the middle of the summer.”

After a lacklustre trading market in Europe yesterday, the FTSE was being indicated down sharply this morning. Traders on the IG platform had it falling 66.5 points to 6977 although 70% of clients were betting it would go higher than that.

US trading last night gave little scope for optimism in a choppy session that saw most shares ending down on the day.

Bitcoin will be in focus as its current sharp tumble led some analysts to predict a long bear market for cryptocurrencies.

Today it was plumbing depths not seen since February, trading down 13% on 24 hours ago at $39,484.

As ever with cryptos, nobody really seems to know why, how much it is likely to fall further or whether it may recover, given that it has no apparent fundamental metrics of value. You may as well bet on raindrops racing down a window.

However, plenty of analysts were pitching in with their views. Avatrade declared that institutional investors were still buying on every dip, citing how MicroStrategy were in the market buying Bitcoin yesterday. “As long as institutions continue to support Bitcoin prices, we are unlikely to see a crypto winter,” it said, adding that the current selloff was “a healthy correction.”

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