Equities have rallied today, extending the gains from Tuesday’s session, with the FTSE 100 70 points higher as the close looms.
The rally in equity markets is gaining traction once again. The Apple-selloff lasted around 12 hours before the buyers took control, pushing stocks off their lows, while in FX markets the dollar is on the rise once again, helping to drive the euro and sterling lower. This has provided the fuel for more losses in EURUSD and GBPUSD, giving additional impetus to the rallies in UK and European markets. Solid gains have been seen in technology and financial sectors in the US, and the risk-on nature of the day has been underlined by the losses in utilities and real estate. These secure yield-plays have been rejected in favour of growth-focused names, another strong signal. While there is the possibility that tonight’s Fed minutes might disrupt the positive session, a lot has happened since the committee met, not least the demise of coronavirus concerns, which seem to have lost their potency.
The positive impact of the UK’s CPI reading this morning is on the wane, as attention turns to the UK-EU trade negotiations. These are already descending into acrimony over the potential for the UK to be given an ‘off the shelf’ deal. Beyond the spike in inflation, it is this issue that will be the bigger sterling driver, and will keep the BoE from moving too hastily to raise interest rates.
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