Canada and Australia don’t often have a central role in moving the markets but the decision by both countries’ central banks to resume rate hikes this week has reverberated through the financial system and helped stoke fears about sticky inflation.
AJ Bell investment director Russ Mould said: “Much of the narrative sustaining the uneven if material rally in stocks this year has been that the battle with inflation is nearly won by the central banks. If the Federal Reserve follows the lead of its Australian and Canadian counterparts then this could be badly undermined and the next Fed decision is now just a week away.
“The FTSE 100 was unchanged in early trading as a recovery for resources stocks helped make up for weakness elsewhere on the index.
“After the jolt of the first annual fall in UK house prices in a decade, the warning of ‘storm clouds’ over the property market from the Royal Institution of Chartered Surveyors felt stark.
“Housebuilder Crest Nicholson certainly seemed glum in its latest trading update. The call for further state support, particularly for first-time purchasers, may feel a bit rich given the housebuilding sector has benefited from ultra-low interest rates, rising property prices and the Help to Buy scheme for years, but it does reflect the tough outlook for the sector.
“Higher rates for longer would depress demand, but whether providing incentives to stoke demand or letting property prices settle at levels which are more affordable is the right approach is open to question.”