London markets are set for a busy week as investors focus on a series of critical economic data releases and central bank decisions that could shape the direction of UK equities and bond yields. The FTSE 100 closed Friday at 7,688.20, down 0.3 per cent on the day, as lingering concerns over inflation and interest rates weighed on sentiment. The index remains broadly flat for the month, with traders cautious ahead of the Bank of England's latest monetary policy announcement on Thursday.
The Bank of England is widely expected to hold interest rates at 5.25 per cent, but markets will scrutinise the accompanying statement and vote split for clues on the timing of future cuts. Governor Andrew Bailey has previously signalled that inflation is moving in the right direction, but services inflation and wage growth remain sticky. A hawkish hold could strengthen the pound and pressure export-oriented FTSE 100 companies, while a dovish tone might boost domestic stocks and housebuilders.
Across the Atlantic, US consumer price index data for February is due on Wednesday, with economists forecasting a 3.1 per cent annual rise. A higher-than-expected reading could push back expectations of Federal Reserve rate cuts, triggering a sell-off in global equities and lifting the US dollar. For UK investors with international exposure, a stronger dollar would benefit companies earning in dollars, such as AstraZeneca and Unilever, but could also increase import costs.
On the corporate front, several FTSE 100 heavyweights are due to report results, including BAE Systems, Persimmon, and Legal & General. BAE Systems is expected to post strong earnings amid elevated defence spending globally, while Persimmon's update will be watched for signs of recovery in the housing market. Analysts at Citi noted that UK housebuilders remain undervalued relative to their asset bases, but cautioned that mortgage affordability remains a headwind.
Oil prices have been volatile, with Brent crude trading around $82 per barrel amid ongoing tensions in the Middle East and OPEC+ supply constraints. Rising energy costs could feed into UK inflation figures, complicating the Bank of England's task. Meanwhile, UK GDP data for January, due Friday, is expected to show a modest 0.1 per cent month-on-month expansion, following a contraction in December, which would indicate the economy is narrowly avoiding a recession.