Defensive Nature Of FTSE 100 Sends It Higher Despite Surging Worries About Inflation And Global Growth

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  • FTSE 100 defensive nature is helping propel index slightly higher.
  • Wall Street indices set to open lower after two sessions of gains.
  • Warnings about recession amid high inflation ricochet around markets.
  • Brent crude back above $120 a barrel as supply concerns continue.
  • Bitcoin still hovering around $30,000 as shift away from risky assets continues.

FTSE 100 Propels Slightly Higher

“The FTSE 100’s defensive nature has helped propel the index higher in early trade, despite the fresh resurgence of worries about the risks of rampant inflation and what effect aggressive policies aimed at curbing it could have on global growth. Global concerns are growing after yet another central bank hiked rates by more than expected.

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The Reserve Bank of India has followed the Reserve Bank of Australia in pushing up the headline rates steeply to try and put a lid on the spiralling up of prices. There are jitters among investors that central banks are playing a game of catch up with inflation, but their late entry means they may try and put the brakes on too sharply, leaving little room for a soft landing for economies already battered by the pandemic.

High energy prices are already crippling economies around the world, and the price of oil has edged up again with Brent crude back above $120 a barrel. The continuing intensity of the war in Ukraine is adding to fears that supply constraints will continue for longer, and the effect of oil cartel OPEC’s recent decision to turn on the taps more fully has faded fast. That’s been helping to lift shares in energy giants like BP plc (LON:BP) and Shell PLC (LON:SHEL), given that higher energy prices have seen cash pouring into their coffers.

Traders are also sensitive to the forecast from the World Bank that the pain of stagflation is going to persist for several years, even if a global recession is averted. As warnings ricochet around about persistently higher prices and slowing growth, the more positive sentiment at the start of the week which helped propel two straight sessions of gains on Wall Street looks set to fade away today with investors nervously waiting for the latest CPI inflation data in the US due out on Friday.

Bitcoin, now a poster boy for the shift away from risky assets, is hovering around $30,000, after setting off on another rollercoaster ride this week. It’s now down by around 54% since it’s November high and Ether has fared even worse, it’s fallen 62% since the heady days of November. There has been a global flight away from crypto as investors have sought safer places as a refuge from volatility."

Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

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