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British equities muted on fading rate cut hopes

written by Bella Palmer

The FTSE 100 index held its ground at 7,710.98 points on Monday, while the FTSE 250 index was flat at 19,185.22 points

British equities started the week on a sombre note as waning expectations of interest rate cuts by global central banks weighed on sentiment, although gains in AstraZeneca on the U.S. FDA's approval for its lung cancer drug restricted losses.

The FTSE 100 index held its ground at 7,710.98 points as of 0850 GMT on Monday, while the FTSE 250 index was flat at 19,185.22 points. Both indexes snapped a two-week losing streak last week amid investors’ optimism about an early interest rate cut from the BoE after domestic economic data indicated slowing inflation.

Nonetheless, souring rate cut prospects globally have dented the bets, with money markets now pricing in almost 68 bps cut from the central bank this year, compared with almost 72 bps last week.

With a key inflation reading, the PPI, coming in hotter than expected on Friday, investor hopes of rapid cuts to interest rates by the Fed have cooled off, leading to more risk-off sentiment, Susannah Streeter, head of money and markets at Hargreaves Lansdown said in a note.

Aiding the dour mood, Bank of England chief economist Huw Pill said on Friday that so far he had seen only "quite modest and tentative evidence" that inflation would fall back to and stay at the central bank's 2% target. Base metal miners lost 1.3% and were among the top sectoral decliners, tracking weaker copper prices as the dollar stabilised.

AstraZeneca, nonetheless, added 3.4% after a combination of the drugmaker's cancer drug Tagrisso with chemotherapy to treat a type of lung cancer was approved by the U.S. FDA on Friday. Among other stocks, Currys surged 33.1% after Chinese e-commerce group said it was evaluating a takeover of the British Electricals retailer and laying the ground for a bidding war after the group declined a rival £700 million ($883 million) deal.


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