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FTSE Slips on Fed Rate Hike Fears

Wed, 21st Mar 2018

The FTSE 100 ended Wednesday down slightly, to see February end with a monthly loss also, as investors remained concerned over the prospect of increasing borrowing costs in the United States, thanks to some comments made by new Fed Chairman Jerome Powerll.

There was additional pressure put on the FTSE 100 by a slowdown in factory activity in China, which is a major market for metals producers - a sector that the FTSE 100 sees heavy weighting from.

Overall the FTSE 100 slipped by 0.7 percent, following on from a 0.1 percent loss the previous day. This means that the UK’s leading index has fallen by 4 percent over the course of February; its worst performance since August 2015. The pound is down by 0.05 percent. Traders have been following the news about a European Document describing the terms for Brexit, and also the debate over the future of Northern Ireland.

The markets also followed the trend seen in Wall Street on Tuesday which had been negative. U.S. stocks saw a more mixed performance on Wednesday, with the Fed’s statement to congressional lawmakers about a strengthening economic outlook being taken as a sign that the Fed may increase interest rates four times this year instead of three. Powell is set to testify before the Senate Banking Committee today, and his comments could significantly impact Wall Street, as higher interest rates would mean a greater cost of borrowing. Powell’s initial testimony did help to boost the dollar in the short term, however.

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