Yahoo Finance FTSE 100 set to pause after surge to 12 month highs
Janet Yellen’s warning of interest rate rises still rings in investors’ ears
(Nicholas Kamm/AFP/Getty Images)The FTSE 100 was set to pause for breath today after Londonshares rallied with their biggest daily gains in two months on Wednesday.
Having leaped 116 points, or 1.7%, to finish comfortably above the 7000 mark yesterday, traders were predicting a slow start to the session this morning. Futures markets indicated the FTSE would open up 6 points at 7047.
Even with such a small gain, that would still mean the FTSE hitting new 12 month highs.
Miners, banks and other recovery stocks were in favour in the previous session, driving the FTSE higher thanks to the UK index’s heavy weighting in such traditional sectors.
It remains to be seen how long investors will be willing to commit to backing shares as markets remain skittish. It was only Tuesday that shares fell sharply after US Treasury secretary Janet Yellen warned interest rates may have to rise.
Here in the UK, the Bank of England announces its monthly decisions on monetary policy at noon, with the expectation being that it will leave interest rates and the asset purchase scheme on hold for another month.
However, it could well bump up its economic forecasts in the light of the ever-improving Covid situation in the UK. It will doubtless refer to the relaxation of Covid restrictions and has already been surprised repeatedly by the relative strength of the economic bounceback.
As with everything the Federal Reserve says in the US, markets will focus sharply on the wording from the Bank for clues about when it may begin tapering off its artificial support for the economy.
While economists expect the central bankers to be less doveish than in previous months they are likely to still be concerned about the real state of the economy, given that millions of jobs are still being supported by state furlough payments. These come to an end in the autumn and it is far from clear what the impact of that will be on jobs and the economy.
Next’s trading update today showed full price sales were running faster than the company had expected in the 13 weeks to May 1, meaning it was confident enough to increase its full year profit forecasts by £20 million to £720 million. That should both give confidence to those hoping for an economic bounceback, but also boost Next’s shares somewhat.
The details in the week-by-week chart for Next’s sales growth clearly showed the big boost to overall sales of its shops reopening in the final three weeks of the period. Reassuringly, retail sales did not appear to be cannibalising from online sales, just adding to the total takings of the group.
Next cautioned that it thought this was not a sustainable picture due to the one-off pent-up demand effect of shop closures.
Upgraded guidance on cashflow from engineering conglomerate Melrose should have a similar effect.
Joe Biden’s surprise move temporarily to strip US drugmaking giants of their patents on Covid vaccines will do little to calm the nerves around global markets. Without patent protection, drugmakers will find it even harder to justify the billions of dollars they spend on drug development which, as GlaxoSmithKline found at its Covid partner Sanofi, often doesn’t work.
The Biden administration tried to sweeten the pill last night by stressing that it was still committed to the concept of intellectual property protection but felt a one-off exception should be made for Covid.
Many of the most successful jabs have come out of the US biotech sector, so the news went down like a coughing fit in a crowded lift among investors in the sector. It could see shares in both GSK and AstraZeneca move today.
GSK’s under fire chief executive Emma Walmsley got the fulsome support of her chairman at the company’s AGM yesterday afternoon, and shareholders overwhelmingly voted in favour of her continued rein, albeit with several complaints about the share price performance.
Pawnbroker H&T might benefit from a Buy note issued to clients by Numis before the markets opened. The broker reiterated its 380p price target and pointed to the rise of online pawnbroking, which would increase the size of the potential market for well-funded players like H&T. Second hand watches and jewellery fit particuarly well into the e-commerce model and are both big retail products for H&T, it said. Shares will open at 289p so the Numis price is ambitious.
CMC Markets traders were calling the Dax in Germany down 22 at 15148 and France’s CAC 40 3 points lower at 6336.
Read More
Unemployment rate drops and vacancies rebound as economy reopens
Is inflation coming back? Warren Buffett and the return of the ‘inflation nutters’
Dogecoin gets serious: Joke crypto’s value doubles in a week 🚀
