The FTSE 100 Index has been in a strong uptrend in the past few months, mirroring the performance of other global indices. It jumped to a record high of £9.343, up by over 23% from its lowest level this week. This article highlights some of the top catalysts that may drive the Footsie Index this week.
UK jobs, inflation, and retail sales data
The first main catalyst for the FTSE 100 Index will be the upcoming UK consumer jobs numbers on Tuesday. Economists expect the upcoming jobs report to show that the economy added 158k jobs in the three months to July, much lower than the previous 238k.
They expect the data to reveal that the unemployment rate remained unchanged at 4.7%, while the average earnings rose by 4.8%.
The other main catalyst for the FTSE 100 Index will be the upcoming UK consumer inflation data on Wednesday. Economists polled by Reuters expect the upcoming data to reveal that the headline Consumer Price Index (CPI) rose to 3.9% in August from 3.8%, while the core CPI slowed to 3.7%.
These numbers will confirm that the UK is in a period of stagflation, which is characterized by a high inflation rate and slow economic growth. It is normally a central bank’s worst nightmare because there is usually no good response mechanism.
The ONS will then publish the latest retail sales data on Friday. These numbers will provide more information about the health of the economy.
Bank of England interest rate decision
The other important catalyst for the FTSE 100 Index will be the upcoming Bank of England (BoE) interest rate decision on Thursday.
Economists polled by Reuters expect the bank to take the UK inflation and jobs numbers into consideration when making these decisions.
Most analysts see the bank leaving interest rates unchanged at 4% as cutting interest rates to boost the economy will likely have a negative effect on inflation.
There will be two key drivers for the FTSE 100 and sterling in this decision. First, they will react to a news on quantitative tightening in the UK, with analysts expecting the annual figure to be between £380 billion and £550 billion this year.
Second, the vote split will be watched closely as investors reflect on what to expect later this year. Market participants expect either one or no interest rate cuts this year.
Read more: Bank of England cuts rates to 4% in historic split vote
UK Gilt yields
The other important catalyst for the FTSE 100 Index is the performance of the UK bond market, commonly known as gilts.
Data shows that the 10-year yield has eased to 4.65%, while the 30-year one dropped to 5.48%, down from the year-to-date high of 5.75%.
A hawkish Bank of England decision will likely lead to higher yields, which will likely impact the stock market. Historically, investors tend to move to the bond market when yields rise.
Federal Reserve interest rate decision
The other important catalyst for the FTSE 100 Index is the upcoming Federal Reserve interest decision on Wednesday.
This will be an important decision as it will be the first time that the central bank slashes interest rates this year.
A Fed cut may positively impact American and global equities. However, the risk is that the interest rate cuts have already been priced in.
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