Finance

FTSE 100 Live: Oil price above $80 a barrel ahead of Federal Reserve testimony


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nflationary pressures will remain the central focus for investors today after Brent crude began trading above $80 a barrel for the first time in three years.

The latest surge in energy costs sets the tone for US Federal Reserve chair Jerome Powell’s appearance before Congree later today, when he is expected to say that the inflationary pressures have lasted longer than anticipated but should fade.

The FTSE 100 index is poised to open slightly higher, with conglomerate Smiths Group among the stocks to watch after it signed a binding agreement to sell its medical division to ICU Medical.

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Inflation jitters

The FTSE 100 is poised to open slightly higher at 7,070 today, having seen an initially strong start to the week erode towards the end of Monday’s session. It was a similar mixed picture overnight on Wall Street amid weakness for tech shares as strengthening US bond yields diminish the appeal of stocks valued on their strong growth prospects.

US bond yields have risen steadily over the past few sessions, hitting three month highs on expectations for an imminent tapering of economic support and the prospect of rising interest rates from next year.

Federal Reserve chair Jerome Powell is due to speak to US lawmakers later today, having warned in pre-released comments that policymakers might have to act in raising rates if inflation becomes more persistent than anticipated.

Comments yesterday from Bank of England governor Andrew Bailey also reinforced market expectations for a modest rise in UK interest rates in the first quarter next year. However, he has vowed the Bank won’t react to sharp wage rises just caused by supply shocks.

Michael Hewson, analyst at CMC Markets, said: “It certainly feels like central bankers are becoming much more nervous about what is happening with the global economy, particularly when it comes to prices.

“While some inflation is welcome, it is becoming increasingly apparent, that even with rising vacancies there are fewer workers available to fill them, potentially creating the perfect conditions for a wage price surge.”

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