FTSE 100 rally cools as Wall Street slips from overnight highs
The FTSE 100’s rally slowed this afternoon, with London’s premier index trading 0.3 per cent up at 5,957.69 points as of the early afternoon.
Optimism that the economy could be in line for further stimulus measures kept the market in the black even as Wall Street slipped from last night’s record highs.
The FTSE 250 of mid cap companies also rose at the same pace, buoyed by positive data from the dominant UK service sector.
According to PMI data released this morning, activity in the UK services sector increased at its fastest rate for over five years in August as the country recovered from the coronavirus lockdown.
The seasonally adjusted IHS Markit/CIPS UK Services PMI Business Activity Index registered 58.8 in August, up from 56.5 in July.
The FTSE’s rise came after strong trading across Europe, with Germany’s DAX up 1.2 per cent to 13,407.62 points and the French CAC 40 1.8 per cent to 5,120.41.
Hopes that policy makers might impose new stimulus measures to aid the recovery drove the increase.
Yesterday, the Bank of England’s deputy governor Dave Ramsden hinted that more liquidity might be made available.
This morning the French government announced a €100bn package to drive its economic recovery next year, with a focus on stimulating green growth and job creation.
“London markets are rushing on hopes that the government will have to consider further rounds of stimulus measures given the current economic situation, in addition to some positivity arising out of France’s stimulus measures,” said Connor Campbell, analyst at Spreadex.
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On the FTSE 100, takeover specialist Melrose Industries was the top riser, picking up 8.2 per cent despite posting a £581m loss this morning.
It was followed by property developer British Land, which rose 4.1 per cent, and publisher Informa, which increased by 2.9 per cent.
The FTSE 250’s charge was led by outsourcer Capita, which saw shares rise 8.8 per cent after rumours of a potential takeover bid by CVC Partners.
The firm was quick to quash the speculation, saying it had not received any such offer from the firm.
Wall Street slips on cooling tech rally and jobs data
A strong overnight performance from US and Asian stocks also helped tee up the impressive open in Europe, with Wall Street last night showing its biggest daily gain since July despite disappointing payroll data.
Both the S&P 500 and the Nasdaq again posted record highs on a combination of positive sentiment over the development of a coronavirus vaccine and hope that a new stimulus package could be agreed.
However, US markets dropped as markets opened this afternoon, as the recent rally in tech shares cooled and new data showed that 881,000 people had made new weekly jobless claims.
The S&P 500 fell 0.7 per cent to 3,555.16 points, while the tech-heavy Nasdaq dropped 1.8 per cent to 11,843.14.
Shares in Apple, Netflix and Tesla all slipped, with the latter falling over six per cent after last week’s five-for-one stock split.
The falls came as the US Labor Department said that 881,000 Americans filed for unemployment benefits, down 130,000 from last week.
Analysts warned that without further stimulus, the US’ recovery from the economic crisis caused by the pandemic was still “highly uncertain”.
“The markets feel like they are being weighed on a set of scales at the moment with stimulus and vaccine hopes on one side and Covid-19 second wave fears and recession on the other,” said AJ Bell investment director Russ Mould.
“After positive signs that politicians in the US might agree a new package to reinvigorate the economy and news of progress towards a prospective coronavirus vaccine the FTSE 100 was tipped in a positive direction – gaining 0.8 per cent and looking to regain the 6,000 mantle.