FTSE 100 and Dow futures in fresh plunge

New Fed chair Jerome Powell delivered the rate hike markets expected, but a more hawkish tone hints heavily at an increasingly aggressive rate tightening cycle, if not this year then certainly in 2019.

That’s backed up by Powell’s comments around US economic growth and inflation, and of fellow policymaker’s concerns about tariffs and trade policy that potentially threaten growth.

It’s possible that we could even see President Trump pull the trigger on a further $50 billion of tariffs against China today, not steel this time but for intellectual-property violations. Trump’s actions could easily escalate and derail not just the US economy, but others too. This is all food for the stockmarket bears both on Wall Street and in London.

A powerful combination of US trade war fears and strong UK jobs and wages data mean it’s currently easy pickings for sterling versus the dollar.

The pound is back above $1.41 and trading at a seven-week high. Sterling strength is typically a trigger for investors to sell FTSE 100 (UKX) stocks, most of which generate huge profits in the US and make less in sterling terms when the pound is strong.

And so it is on Thursday. The FTSE 100 has plunged below 7,000 for the first time since December 2016 and the current negative trend points to further losses for the main index.

Source: interactive investor             Past performance is not a guide to future performance

Annual results from Ted Baker (TED) are encouraging, and growth of almost 40% in online sales is significant.

But retailers have fallen out of favour and few are immune from negative trends affecting the industry, which includes Baker whose shares are sharply lower on a more cautious outlook.

An interest rate rise in May will put further pressure on household budgets already squeezed by falling real wages. That could spell trouble for Next ahead of its full-year results tomorrow.

There was never any chance of a shock hike in UK interest rates at today’s policy meeting given forecasts for sluggish growth for years to come.

Latest data also shows inflation becoming less of a risk as we move through the year, but that might not be good enough for Mark Carney.

Carney is already committed to tackling inflation and, with more people employed now than at any time in the past 42 years and a return to growth in real wages imminent, the Bank of England governor could well decide to nip an acceleration in wages growth in the bud at the meeting in May.

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