The FTSE 100 and European stocks had a bright start this 2023, as investors assessed China’s reopening and awaited minutes from the latest US Federal Reserve policy meeting.
“In the UK, the premier index opened the year on the front foot in early exchanges, driven by mark-ups across various sectors, such as oils and banks,” Richard Hunter, head of markets at Interactive Investor, said.
Read more: Global investment outlook for 2023
“In addition, the possibility of increased Asian travel also boosted the likes of International Consolidated Airlines and Rolls-Royce, while the initial risk-on approach came at the slight expensive of the more defensive sectors,” he added.
Rolls Royce (RR.L) led the gains, up 6.56%, followed by Ocado (OCDO.L), which rose 5.74%, and International Consolidated Airlines (IAG.L), up 4.73%. Housebuilders Barrat (BDEV.L) – up 4.18% – and Persimmon (PSN.L) – up 3.94% – finish off the top five risers .
Shore Capital analyst Peter Ashworth is cautiously optimistic for this year: "2022 ended with a whimper rather than the Santa rally we had hoped. The year-end reviews make dispiriting reading. The FTSE 100 ended up “flat” on the year, maintaining the rally seen since midOctober. In 2022, the market has absorbed nine increases in interest rates, inflation at 10.7%, (close to a 40-year high) and a 0.3% fall in GDP in Q3 22.
"Against this backdrop, the outlook for 2023 looks better with interest rates peaking and inflation expected to be coming down. With undemanding valuations, we start the new year with a more upbeat view. One resolution we hope to keep."
On Wall Street, stocks opened higher before losing traction as investors await policy decisions by global central banks, in addition to the US payrolls data this week.
Global investors will have one eye on the minutes from the Fed’s December policy meeting, due to be published on Wednesday.
Meanwhile, Brent crude (BZ=F) has started to correct after starting the session higher, with the price of a barrel dropping to around $84 as traders digested mixed signals on demand from China, the world’s largest crude importer and the dollar strengthens.
In Asia, Tokyo’s Nikkei 225 (^N225) remained closed for a holiday while the Hang Seng (^HSI) in Hong Kong climbed 1.79% to 20,135. The Shanghai Composite (000001.SS) climbed 0.88% to 3,116 points as investors weighed the short-term implications of the rise in COVID infections in China against the potential longer-term boost from the full reopening of the world’s second-largest economy.