The run of three consecutive weekly gains came to an abrupt halt last week after the US Federal Reserve warned interest rates could go higher than markets expect as it strives to bring down inflation. The blue-chip S&P 500 fell 1.7% and technology focussed Nasdaq, which is more sensitive to changes in long-term interest rates, 3.9%. The FTSE 100, however, benefitted from its higher exposure to energy and materials stocks and gained 2.9%
Markets fully expected the Federal Reserve to hike its benchmark rate on Wednesday by 0.75% for the fourth time in a row but the hawkish tone of the subsequent press conference caught many investors off guard. Chairman Jay Powell warned the Fed still had “some ways to go” to get inflation under control and recent data suggested interest rates will have to move higher than previously thought.
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