The FTSE 100 rose for the second day as markets continued to be buoyed by positive vaccine news, president-elect Joe Biden’s cabinet picks, and stronger-than-expected US economic data.
The FTSE rose 0.1 per cent in early trading, hitting 6,441 points. Its little brother, the FTSE 250, fell 0.5 per cent however.
Market optimism yesterday sent US stocks to a new all-time high. The Dow Jones broke through the 30,000 point barrier for the first time ever, and the S&P 500 jumped 1.6 per cent.
European investors clung on to some of that optimism this morning. Germany’s Dax was up 0.1 per cent while the Europe-wide Stoxx 600 was in positive territory. US stocks were set for a mixed start.
“Uncertainties about next year are being cleared out of the way and the vast liquidity put is still positive even if this all looks like it’s a little exuberant,” said Neil Wilson, chief market analyst at Markets.com.
Stocks have soared in November after three big pharma companies said their vaccines are highly effective.
The Moderna and Pfizer/Biontech are more than 90 per cent effective. The Astrazeneca/Oxford University vaccine is 90 per cent effective in some cases, the group said on Monday.
These announcements have triggered a “reflation trade” pivot in markets. Investors are buying up previously unloved companies that would fare well from an economic recovery.
FTSE 100 continues to reap reflation trade
Britain’s FTSE 100 has reaped the benefits, being chock full of financials and industrials. Companies like British Airways-owner IAG and oil groups BP and Shell have jumped.
The rise in London stocks today came ahead of a major economic statement from chancellor Rishi Sunak. Analysts expect him to lay out more support for the businesses and households, but also a stark view of the health of the economy.
Investors have gone firmly off the dollar, which they consider a safe-haven asset. It was down 0.3 per cent this morning against a basket of other currencies.
US stocks have boomed as the political situation appears to be calming. President Donald Trump acquiesced to an official judgement that the transition to Biden should begin.
Meanwhile, Biden’s pick of former Federal Reserve chair Janet Yellen as his Treasury secretary has cheered markets. Investors think she will push for a big stimulus package that will boost the economy.