Fed rate decision keeps equities under pressure

Although Wednesday’s Federal Reserve decision to raise interest rates came as no surprise the markets still took a blow because the central bank was more hawkish than expected, anticipating that it will have to continue raising rates in the future, potentially at a faster pace.

The FTSE started the day on a lower note, down 0.6%, as did all the main bourses in Europe. Asian shares also traded lower focusing on their own set of concerns including weak Chinese retail sales data and the trade friction between US and China.

ECB expected to signal end of asset purchase programme

In contrast to the Federal Reserve, Europe may just be about to start its own monetary tightening cycle. The European Central Bank meets Thursday and is expected to signal the end of its large asset purchase programme which has kept the euro-zone afloat since the financial crisis. 

Several central bank officials have indicated that they are leaning towards stopping the programme, potentially before the end of this year.

While this will make things harder for businesses it would help to strengthen the common currency. The euro perked up against the dollar and the pound ahead of the meeting while the pound was also a touch firmer against the dollar.

UK house price show tentative signs of rising

UK house prices started rising again in May, albeit at a relatively slow rate, as the market seems to have turned a corner following a drop to its lowest level in five years in April. 

However, the Royal Institution of Chartered Surveyors which conducted the survey said it was too early to call a change in the sluggish property market. The pricey London market remains under pressure more than other parts of the country and is the only part of the UK where prices are likely to become even cheaper over the next 12 months. 

The rest of the country is doing slightly better but even there new properties are coming on the market at a slow pace and the number of houses on offer remains near a record low.