UK Markets closed

FTSE 100 waits on US jobs data as China raises more red flags on inflation

·2-min read

The FTSE 100 Index was set to fall slightly today as markets continue to adopt a holding pattern ahead of US inflation data later in the week.

News on Chinese prices gave a possible indication of where global inflation is heading this morning, with a jump in May prices of 1.3%. Consider that in February it was falling 0.2% and you get a picture of steep pricing pressure.

Given that producer prices - the price of goods leaving the factory gate - were up 9% compared with minus 0.4% at the end of last year, that picture only gets more worrying.

There appears to be little question that prices are rising in most of the biggest economies of the world, yet central banks remain extremely reluctant to tighten their super-easy monetary policy of near-zero interest rates and quantitative easing.

Watch: FTSE 100 'milestone' as it tops 7,000 mark for first time in more than a year

That has led to the bizarre situation where inflation is rising, yet world stock markets are holding near record highs and bond yields - a proxy for interest rate expectations - are near their lowest levels in a month.

The reason for all this is that central banks have indicated that they are not prepared to begin tapering off their support until Covid-related unemployment is clearly back under control.

With 8 million more people out of work in the US than pre-crisis, that looks unlikely soon, even as vacancies have soared.

For that reason, many investors are taking the view that, even if Thursday’s US inflation data comes out stronger than expected, markets will still shrug it off.

The FTSE 100 Index was being called down 8.3 points at 7092 by IG platform traders.

Watch: What are SPACs?

Read More

UK recovery outstripping G7 and EU, says Bank of England chief

Britain needs a pay rise, says Bank of England economist

FTSE 250 hits five-year high as markets roar back to life