The FTSE 100 is 20 points higher in early trading, bolstered by Lloyds and some opportunistic buying in HSBC.
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Lloyds splashes the cash
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UK GDP keeps lid on sterling
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US markets see a shift in risk appetite
Yesterday saw the banking sector knock a sizeable chunk off the FTSE 100, but today the picture is the reverse, as financials account for around half the gains in point terms. Lloyds is one of the chief contributors, after it published results that included a higher dividend and a welcome reduction in PPI claim provisions. Bargain-hunters are also active in HSBC, as yesterday’s sharp fall suddenly renders the bank much more attractive. Given the bullishness prevailing in markets, it makes sense to wait for such opportunities – it certainly worked for those brave enough to buy into Rolls-Royce last week. UK GDP data was revised higher for the quarter-on-quarter number, but the cut to the yearly figure prompted another drop for cable, putting the pair on a path back to $1.24; selling the rallies has been a pattern here, especially with hawkish Fed members doing the rounds.
The rally goes on in US markets, despite ever-rising valuations. Equities don’t even seem to be climbing a wall of worry – instead we are now in the ‘unbridled optimism’ stage. One note of worry is the underperformance of small caps, as the Russell 2000’s gains for the year lag that of its bigger cousin the S&P 500. A shift to utilities and consumer staples in yesterday’s US session could be the indication that the mood of general ebullience could be coming to an end. Ahead of the open, we expect the Dow to start at 20,717, down 26 points from last night’s close.
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