FTSE 100 rises despite awful economic data as oil rebounds
The FTSE 100 recovered from a dip today to post a one per cent climb by the mid-afternoon, despite dire economic data as oil prices rebounded.
Britain’s FTSE 100 stock index was down marginally by midday at 5,768 points after climbing more than two per cent yesterday.
But by 3.30pm London’s index had risen 1.1 per cent to 5,833 points.
It had fallen roughly five per cent of Monday and Tuesday, however, as plunging oil prices rocked investors.
Today oil prices found a foothold, however. The Brent crude oil price, the international benchmark, rose 10.6 per cent to over $22 per barrel. WTI crude, the US benchmark, rocketed 28 per cent to $17.65.
FTSE 100 unmoved by dire economic data
That appeared to offset dire economic data released today in the UK and Eurozone.
UK manufacturers and services sector firms saw record falls over April in today’s flash IHS Markit purchasing managers’ index.
The overall reading crashed to a survey-record 12.9 for the month. Anything below 50 represents a contraction.
And the Eurozone fared little better, hitting 13.5. The appalling scores showed the severe impact of coronavirus lockdowns on the economy.
But the FTSE 100 was largely unaffected by the scale of the impact.
And European markets were mixed. By the mid-afternoon Germany’s Dax had risen 1.3 per cent and France’s Cac was up 1.6 per cent.
The pan-European Stoxx 600 was up 1.2 per cent.
“Markets seem to have taken today’s incredible readings in their stride, or at least in a relatively calm fashion,” said Chris Beauchamp, chief market analyst at trading platform IG.
‘Ugly’ data offset by jump in oil prices
Connor Campbell, financial analyst at online trader Spreadex, said the economic data was “ugly as all hell”. But he said investors showed “relative calm” in their response.
Brent crude’s nine per cent jump to $22.23 helped stabilise the FTSE 100 and European stocks despite UK and Eurozone PMIs proving to be awful.
“PMIs were far worse than forecast – and those forecasts were already dire,” Campbell said.
“Heavy losses for FTSE 100 and pound alike would have been excusable. Instead the UK index was effectively flat, while sterling actually added 0.2 per cent against the dollar.”
Earnings season weighs on FTSE 100
The FTSE 100 was initially held down by a weak set of results from consumer giant Unilever. The firm’s shares are down three per cent after it scrapped a full-year forecast and said it had suffered a sharp decline in activity in China.
The mixed picture comes a day after stocks rallied following two days of falls due to chaos in the oil markets. WTI crude oil prices fell into negative territory for the first time ever on Monday.
“In the latter half of yesterday’s session, the oil market underwent a huge rebound, and that helped boost sentiment across the board,” said David Madden, market analyst at CMC Markets.
US stocks rise despite 26m unemployed
US jobless claims spiralled again, hitting 4.4m last week, new figures revealed today. That means 26m Americans have now made unemployment claims in the last five weeks.
In contrast, the highest weekly total of US jobless claims during the financial crisis was 800,000.
However, while the FTSE 100 and European stocks fell temporarily into the red today, US stocks defied the data to climb.
The S&P 500, the Dow Jones and the Nasdaq all posted gains of around one per cent.
Russ Mould, AJ Bell investment director, pointed out that the S&P 500 is now just four per cent off all-time highs last year.
“If you had said to someone a year ago that a global pandemic would strike, large parts of the US economy would be in lockdown and that stocks would only fall four per cent from record-highs over the next 12 months you would have probably been told you were off your rocker,” he said.
Stocks supported by US stimulus
Sentiment has also been supported today by a $480bn (£390bn) stimulus package from the US Congress that is set to be passed this afternoon. It would take the US’s total fiscal stimulus to around $3 trillion.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said he sees a few catalysts for stock market stabilisation.
“One, stabilisation in the oil markets; two, COVID-19 policy support; and three, economic normalization. Stocks could continue to move higher if we see more signs pointing the way to our upside scenario.”
In the currency markets the pound was up 0.3 per cent against the dollar at $1.237. The dollar rose 0.3 per cent on an index against other currencies.
The yield on the UK 10-year government bond, or Gilt, fell after the Treasury announced a huge increase in bond sales to fund its coronavirus support programmes.
It was down two basis points (0.02 percentage points) to 0.307 per cent. Yields move inversely to price.