FTSE housebuilders soar

Heading into the close, the FTSE 100 is up over 150 points, while the Dow Jones adds almost 5%.

• Indices continue to make gains
• Signs of hope in various countries
• FTSE housebuilders soar despite construction PMI

While we haven’t had a ‘limit up’ moment for US markets today, there is still plenty of rampant bullishness to be found. Stock markets began the day with gains and haven’t looked back, with the likes of the Dow, FTSE 100 and Dax all enjoying triple-digit gains. This might seem odd when we can expect weeks of poor data, but the simple fact is that talk of reopening economies is now widespread, and the data from Italy, Spain, Belgium and even New York is providing hope that some countries have passed the peak and others are nearing it. In such an environment, investors will be keen to snap up the bargains on offer, ignoring warnings about a terrible year for earnings in 2020. Such an approach  makes sense, as long as people do look beyond 2020.  It is a solidly risk-on day for US stocks, although the hunt for yield goes on, as the 6%+ rise in the Utilties ETF shows. Given the wholesale abandonment of dividends for many firms, it makes sense that the predictable cash flows of utility companies remain in high demand.

A dire UK construction PMI has not deterred healthy inflows into UK housebuilders either. If the UK begins to ease restrictions in coming weeks, a no longer implausible scenario, then activity will resume too. While demand will take a while to pick up, perhaps the share prices of these firms are pricing in a little too much bad news given the slightly brighter outlook for the UK economy. Nothing is certain however, so investors cannot rest easy just yet.