Thursday 17 December 2020 11:06 am

FTSE 100 slips but global markets hit fresh highs on vaccines and stimulus

The FTSE 100 slipped, weighed down by a rising pound, as global markets hit a new all-time high amid optimism about vaccines and fiscal and monetary stimulus.

Despite the rise in global stocks, the FTSE 100 lagged behind as the pound rose 0.8 per cent to $1.360, a 32-month high. 

A higher pound weighs on the overseas earnings of the index’s constituents. The FTSE was down 0.1 per cent at 6,565 points.

In Europe, Germany’s Dax was up 0.8 per cent while France’s CAC 40 climbed 0.3 per cent. The Europe-wide Stoxx 600 was 0.4 per cent higher.

US stocks were set to open higher, according to futures prices. Investors sold safe-haven assets such as the dollar.

The market jubilance – FTSE excluded – came as US lawmakers appeared to edge closer to a more than $900bn (£660bn) stimulus deal.

US Senate majority leader Mitch McConnell said he was optimistic that the two sides can reach an understanding soon.

The US Federal Reserve’s declaration yesterday that it would keep buying bonds at $120bn a month to support the recovery has also buoyed investors.

Milan Cutkovic, market analyst at Axi, said: “The pressure to reach a deal is rising on both parties as the US economy could be sliding into another recession.”

He added: “Investors remain optimistic that another aid package is just around the corner.”

FTSE 100 drops behind – again

The FTSE 100 reprised its role as a laggard, however, missing out on the day’s gains. In large part this was due to action in the pound, which rose on hopes of a Brexit deal and dollar weakness.

Home secretary Priti Patel added to Brexit optimism this morning. She said: “We are in that tunnel of negotiation and our teams continue to work incredibly hard.”

Overseas FTSE 100 earners fell as the pound rose. British American Tobacco, jet engine-maker Rolls Royce, Burberry, and Glencore were among the top fallers.

Fresh lockdowns – including in London – also hit domestic stocks. Vodafone, supermarkets Morrison’s, Sainsbury and Ocado, and Associated British Foods also dropped.

Vaccines and stimulus push stocks higher

Vaccine hopes and the passing of the €1.8 trillion (£1.6 trillion) European budget and stimulus package also served to boost global stocks, with the MSCI world index hitting a new all-time high.

Brent crude oil rose 0.2 per cent to $51.20 per barrel. The prospect of vaccines aiding a return to normal life lifted the demand outlook, pushing prices higher.

Meanwhile Bitcoin continued its hot streak, rising past $23,000 dollars for the first time.

John Hardy, head of FX strategy at Saxo Bank, said the Fed’s dovish tone yesterday had lifted markets.

“Everything is up except for sideways US treasuries in the wake of the [Fed] meeting last night,” he said. 

“The bulls saw nothing to fear in the very few changes to the Fed monetary policy statement and somewhat more optimistic Fed economic projections.”