FTSE 100 rises as investors anticipate Fed rate cut

On Friday, the FTSE 100 index increased by 32.12 points, or 0.39%, closing at 8273.09, driven by investor optimism regarding a potential interest rate cut by the US Federal Reserve. The anticipation centers around a possible 50 basis point reduction, which has gained traction in recent discussions, with the likelihood rising from 30% to 40% in just 24 hours, according to the CME’s Fedwatch tool. This shift in expectations reflects growing concerns about the impact of high interest rates on the economy, particularly as the jobs market shows signs of cooling. Kathleen Brooks, research director at XTB, noted that the Fed is increasingly cautious about maintaining elevated rates for too long, fearing it could jeopardize a soft landing for the economy. While the market still largely expects a 25 basis point cut, the possibility of a more aggressive move has stirred investor sentiment. In Europe, other major indices also saw gains, with Frankfurt’s Dax rising 0.92% and the Cac 40 in Paris up 0.41%. In the US, after European markets closed, the S&P 500 and Dow Jones both recorded increases of 0.59% and 0.98%, respectively. Currency markets reflected a slight strengthening of the pound against the dollar and stability against the euro. Meanwhile, in company news, Vodafone’s shares rose 1.1% despite regulatory concerns over a proposed merger with Three UK, which could potentially lead to higher customer bills. Overall, the market's positive response to the Fed's potential rate cut indicates a cautious optimism among investors, even as they navigate uncertainties surrounding corporate mergers and economic indicators.