Wednesday 9 September 2020 2:50 pm

FTSE 100 and US stocks climb as investors regain poise

The FTSE 100 and US stocks have risen after a bloodbath on global markets yesterday saw big tech names plunge.

London’s blue-chip index rose 1.3 per cent to 6,009 points in afternoon trading. The FTSE 250 – the 100’s little brother – fell 0.2 per cent, however.

Read more: Tesla shares set for worst day in six months as tech sell-off bites

The US’s tech-heavy Nasdaq, which sank 4.1 per cent yesterday, rose 1.3 per cent in early trading. The S&P 500 climbed 1.1 per cent and the Dow Jones rose one per cent.

Optimism spread in Europe, too, with the continent-wide Stoxx 600 up 1.2 per cent. Germany’s Dax rose 1.5 per cent. 

The US big tech sell-off that began last week gathered pace yesterday as traders returned from the Labor Day weekend.

A fall of more than 10 per cent since recent highs took the Nasdaq into correction territory. The S&P 500 tumbled 2.8 per cent and the Dow Jones fell 2.3 per cent.

Read more: Coronavirus: England to ban meetings of more than six people

All of the big firms that had driven US stock markets to record highs fell victim to investor panic. Apple shed seven per cent, Google and Amazon dropped four per cent and Netflix fell two per cent.

But it was Elon Musk’s Tesla that took the biggest battering, falling a massive 22 per cent.

FTSE 100 helped by falling pound

The FTSE 100 escaped the rout, however. It fell around 0.1 per cent yesterday, in part because it has very few big tech names.

The blue-chip index had been helped by a falling pound in recent days amid Brexit drama. A lower pound increases the relative value of the overseas earnings of the multinational firms that make up the FTSE.

Read more: Brexit: Boris Johnson plans to breach withdrawal agreement to put trade talks in peril

Brexit fears have come back to markets with a vengeance, after reports that the UK government would override key parts of the withdrawal deal it struck with the EU.

But, counterintuitively, the pound jumped shortly after the government published the bill today that confirmed it would turn its back on some parts of the deal. It was last up 0.2 per cent at $1.30.

Nonetheless, it was trading at around its lowest level since July. “Sterling has been on the decline after Prime Minister Johnson ratcheted up the rhetoric with the EU as Brexit talks resume this week,” said Raffi Boyadjian, investment analyst at trading platform XM.

BT was the biggest FTSE riser, benefitting from takeover rumours as it climbed 5.2 per cent.

Read more: Brexit: EU threatened to block Great Britain exports to Northern Ireland

Multinationals boosted by the pound’s recent decline also fared well. British American Tobacco, Unilever and Shell all rose around three per cent.

Astrazeneca’s shares fell 1.1 per cent after it paused its phase-three vaccine trials in response to a patient contracting a mystery illness.

US stocks rebound – slightly

US investors regained their nerve and bidded up Wall Street stocks, putting them on the road to recovery from last week and Tuesday’s falls.

The big tech names regained some ground in early trading. Apple was up 2.8 per cent, Amazon was 1.5 per cent higher and Tesla was up a huge 8.8 per cent.

Analysts debated whether the fall in stocks may continue over the coming weeks.

Jeffrey Halley, senior market analyst at currency firm Oanda, said that “the underlying drivers of the ‘buy-everything’ rally” were still “intact”.

Read more: Tesla shares set for worst day in six months as tech sell-off bites

Those drivers were “a global savings glut hunting for yield, bottomless amounts of zero per cent central bank money looking for a home and expected post-Covid-19 recovery of sorts in 2021”.

Milan Cutkovic, market analyst at Axicorp, said: “There is currently no panic, and some investors see the latest downturn as a healthy correction after several of the tech giants reached staggering heights.”