Market news today - next interest rate decision looms

THIS week much of the focus will be on interest rates, with three significant interest rate announcements in as many days.

The US Federal Reserve kicks things off on Wednesday when the Federal Open Market Committee announces its rate decision. It’s widely expected that the Fed will keep rates at 5.5%.

The same certainty can’t be said about the Bank of England’s decision on Thursday. Another rate rise, this time of 25 basis points is expected.  The UK central bank will be heavily influenced by the UK inflation figures that come out the day before the Monetary Policy Committee meets. These are expected to show a slight increase in the headline rate compared with last month.

Finally on Friday, it’s the Bank of Japan’s turn. No change is the most likely result here. The Bank of Japan is expected to keep rates unchanged at minus 0.1%.  Although there has been talk over the past week of an end to Japan’s era of negative interest rates, with a rate rise possible by the end of the year.

Globally, investors appear to have started the week worried that flagging global demand could weigh on the chipmaking sector. After a tech-led sell-off on Wall Street was sparked by news that Taiwan’s TSMC — which is the world’s biggest contract chipmaker — had told its major suppliers to delay delivery of high-end chipmaking equipment.

TSMC’s share price, which fell 3.2% on the news, has been warning of a deepening slowdown in the chipmaking sector. Fears are that the recent boom in artificial intelligence technology will struggle to compensate for broader economic headwinds and China’s stalled recovery.

Back on home soil, UK house prices are set to be another talking point this week. The Office for National Statistics house price index is due out on Wednesday and with asking prices for UK homes having seen their biggest annual fall since March 2019, it’s not likely to be positive news.

According to property website Rightmove, over a third of homes currently on the market have reduced their asking price at least once. And it says that’s the highest proportion in more than 12 years. The size of the average price drop is also the highest since January 2011.

On a monthly basis though there has been some positive movement - average asking prices inched up by 0.4% in September to £366,281, although that is a lower increase than usual for the time of year. The question now is, will we get the usual autumn bounce? Or is the bigger-than-expected summer lull set to continue into the latter part of the year?

For investors pinning their prospects on company fortunes rather than bricks and mortar, it’s a slightly busier week this week for earnings. Retail is in the spotlight, with B&Q-owner Kingfisher, Next and Ocado reporting.

The question here is, has the summer washout swept across the entire sector?

After that hefty loss in the first half of the year, Ocado will surely want to settle investor jitters over sluggish demand. While it may be keen to be seen as more of a technology play, than a retail one, its fortunes still rest heavily on the grocery business it runs in partnership with Marks & Spencer now.

And here, with food inflation still running high and consumer belt-tightening not easing any, the fact that Ocado isn’t part of the race to be cheapest, that is being aggressively run by the other supermarket chains, could see it left behind.

For its part Ocado narrowly avoided relegation from the FTSE 100 this year after a timely boost in its share price, but it isn’t exactly flying high. By contrast, Marks & Spencer, which makes its return to the blue chip index this week, after its four-year hiatus, is showing the retail sector how the cost of living crisis should be done.

Also up is DIY group Kingfisher, owner of B&Q and Screwfix, which should update on its seemingly incomprehensible strategy of opening new stores while increasing the percentage of sales generated online. And we also hear from Next on Thursday. In its most recent results, the company said that full-priced sales jumped by 9.5% in the second quarter. Its shares have too, up almost 23% on the year to date.

And finally, over in the US, California has sued several of the world’s biggest oil companies, including Shell and BP. The case was filed in the superior court in San Francisco by California’s attorney-general on Friday. The civil lawsuit alleges the oil giants have deceived the public for decades over the true impact of burning fossil fuels. So, even more work for whoever eventually takes the helm next at BP, after chief executive Bernard Looney’s sudden resignation last week.

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