Powell testimony continues to support risk appetite

Equities have posted small gains so far this morning, with the FTSE 100 up 20 points, lifted by hopes of a Fed rate cut and continued inflows into housebuilder stocks.

European equities are enjoying small gains, as stock markets attempt to build on the rally seen in the wake of Powell's testimony yesterday. The Fed chief has cleared the way for a cut at the next meeting, although it still seems likely that it will be just a 25 bps ‘insurance' cut instead of a 50 bps dose of ‘shock and awe'. However, a stronger pound and euro, the flipside of the weaker dollar, have meant that indices on this side of the Atlantic have failed to match the bullishness displayed by the US, and the memory of profit warnings from earlier in the week is also serving to limit risk appetite. Rising Iran tensions have helped boost the price of crude oil, with a break above $60 likely to lead to more gains as investors keep a close eye on the geopolitical situation and rising US demand.

UK homebuilders continue to find favour after Barratt's update yesterday. The sector has received a boost after a period of weakness in construction, although those investors moving in now will have to be mindful of the potential disruptions arising from a no-deal Brexit. No deal has gone from being unthinkable to a definite possibility, and with the likes of Amber Rudd now conceding that it must remain an option, it looks like attitude in some parts of the Conservative Party is coming round to this view.

Ahead of the open, we expect the Dow to start at 26,913, 53 points higher from Wednesday's close.