FTSE Rallies On Chinese Stimulus Hopes

After a brief stint in the red the FTSE has powered higher on Monday as risk on dominated. Better than expected results from Citigroup boosting Wall Street and the prospect of stimulus for China lifted the FTSE at the start of the week. 

Chinese GDP data showed that the economy grew by 6.2% its lowest level of growth in almost a decade. However, rather than depressing the market, hopes of stimulus for the world’s second largest economy have boosted risk appetite, lifting demand for riskier assets such as stocks.  Just as we are seeing with the US, the prospect of easing financial conditions is not being interpreted as bad news for stocks. Instead the prospect of cheaper borrowing in the case of the Fed and support from the PBOC is giving investors plenty of confidence to buy in. 

Miners gain

Miners are featuring on the FTSE leader board, with the likes of Antofagasta, Evraz and Anglo American all trading over 1.6% higher. The prospect of economic stimulus in China, the world’s largest consumer of metals is like Christmas come early for the miners.

House builders struggle on falling house prices

House builders dominated the lower reaches of the FTSE following Rightmove data showing that prices slipped by -0.2% year on year. Ongoing political and economic uncertainty means that potential homeowners are delaying the decision to buy a new property. With lingering Brexit uncertainty, the current political climate means that confidence, a crucial ingredient for a strong housing market, has been hit. As a result, both buyers and sellers are hesitating. The likes of Persimmon, Berkeley Group and Barret Development traded over 1% lower.

However, it’s not all doom and gloom, with house prices falling less in London than previous months, this is being interpreted as signs that the market is bottoming out. Let’s not forget that UK employment levels remain strong, wage growth steady and mortgage approvals high which are underpinning house prices. There could be a further lull in housing market activity between now and the Autumn statement as potential homeowners wait to see if Conservative leader frontrunner Boris Johnson puts in any reforms surrounding stamp duty should he take the reins.

Pound drifts lower ahead of UK data 

The pound put in a poor performance on Monday, unable to hold onto the gains from the end of last week. With the UK Conservative leadership results not due until 22nd July and a win by Boris Johnson largely priced data will drive movement in the pound this week. 

There are no influential economic releases today, leaving investors to look ahead to this week’s wages, jobs and inflation releases for further clues as to the health of the UK economy, following last week’s warnings from the BoE’s Mark Carney. The BoE Governor warned that the damage from elevated global trade tensions could in fact be more persistent and damaging than initially thought.