Wall Street nears record highs on retail optimism as mining stocks lift FTSE 100
Wall Street edged towards record highs this afternoon on optimism about better-than-expected retail earnings as the FTSE 100 pushed higher during a subdued start to the week’s trading.
The Nasdaq rose 0.68 per cent while the S&P 500 resumed its ascent towards record highs with gains of 0.29 per cent. However, the Dow Jones slipped 0.27 per cent into the red.
It came after the FTSE 100 reversed early losses to close up 0.80 per cent at 6,139 points.
Germany’s Dax and French benchmark Cac 40 were also up 0.31 per cent and 0.35 per cent respectively following a quiet day of trading.
US stocks near record high
Gains on Wall Street left the S&P 500 hovering just below its record high recorded in February.
A bullish run pushed the index towards touching distance of the record last week, but jitters later in the week about economies’ Covid-19 recovery meant it stopped just short.
However, positive sentiment this afternoon meant the S&P 500 was trading just three points shy of its February high.
“It goes back to the basic factor – with interest rates low, next to zero even though yields have gone up, there is no place to put your money so stocks continue to hover near record highs,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
“I am not sure if we can [hit a record high] today because up until now there’s no particular news that would spark a strong rally.”
Traders were also buoyed by optimism about a string of earnings reports from US retailers, which are expected to gain a lockdown sales boost.
Walmart and Target are both set to report earnings later this week alongside home improvement chains Lowe’s and Home Depot.
It came as traders shrugged off concerns about US-China relations.
The two countries had been due to meet on Saturday for a review of their phase one trade deal, but the meeting was scrapped due to conflicting schedules and the need to allow China more time to buy US exports, Reuters reported.
Meanwhile, focus is beginning to shift to the US presidential election in November, with controversy heating up over Donald Trump’s attack on the postal service.
Bullish sentiment was also stunted last week as optimism over a potential US stimulus package began to fade and disappointing retail sales took their toll.
“US politics is also presenting a problem for investors, with little in the way of evidence that the delay to a new stimulus plan is causing damage to the US economy,” said Michael Hewson, chief market analyst at CMC Markets.
Miners lift FTSE 100
While markets were somewhat subdued in Monday trading, the FTSE 100 outperformed as it was lifted by gains for major blue-chip miners.
Anglo American was among the top FTSE risers, gaining 2.42 per cent. Polymetal International and Fresnillo were also up more than two per cent.
The gains came after China announced it would inject $100bn into its financial system and gold and copper prices rose.
But Russ Mould, investment director at AJ Bell, warned the impact of the stimulus was limited, adding: “Investors will be wary of reaching the point where the announcement of big financial packages no longer acts as a positive catalyst.”
Connor Campbell, financial analyst at Spreadex, said it was a “stodgy session for all bar the FTSE”.
“It appeared that the index’s successes were linked to the latest lunge from gold,” he said.
“The safe haven instrument became appealing after another weekend of disappointing or downright worrying headlines, climbing 2.1 per cent to re-cross $1990 per ounce.”
He added: “And with copper also up two per cent, the FTSE’s miners started the week on the front foot.”
Covid-19 cases rise
“The number of new Covid-19 cases across Europe is the number one thing to watch in the coming days as it has the potential to send nascent economic recovery into reverse,” said Neil Wilson, chief market analyst at Markets.com.
Italy last night tightened its rules on wearing masks and shuttered nightclubs amid fears about an uptick in cases across the continent.
Germany has also extended travel warnings to nearly all of Spain.
It came after the UK added France, the Netherlands and Malta to its 14-day quarantine rules.
The announcement continued to hit travel stocks, with IAG and Tui both falling more than five per cent. Easyjet and Ryanair, which announced base and route closures, also dropped roughly five per cent.
Hewson added: “The implementation of quarantine measures, by the UK government, as well as others, in response to rising infection rates in other European countries is also raising the political temperature in a fashion that appears to be prompting knee-jerk responses that could exacerbate the economic damage all round.”
Empty offices hit property firms
Property developers were among the biggest FTSE fallers this morning amid renewed signs that workers will not be rushing back the the office.
Fund manager Schroders yesterday became the first major City firm to tell staff they will not be required to return to the office five days a week even after the pandemic.
The announcement will reignite fears that changes to working habits due to Covid-19 will become permanent.
Property giants British Land and Land Securities Group were both hit by the move, falling 1.80 per cent and 1.68 per cent respectively.
British office workers have been much slower to return to offices than counterparts in France, Germany and Italy according to analysis from Morgan Stanley’s research unit Alphawise.
Just over one-third of UK white-collar employees have returned to work since the lockdown, compared to almost three-quarters of staff in Europe.
Trade talks shelved
The US and China had been due to meet on Saturday for a review of their phase one trade deal.
But the meeting was scrapped due to conflicting schedules and the need to allow China more time to buy US exports, Reuters reported.
Meanwhile, focus is beginning to shift to the US presidential election in November, with controversy heating up over Donald Trump’s attack on the postal service.
Bullish sentiment was also stunted last week as optimism over a potential US stimulus package began to fade and disappointing retail sales took their toll.
“US politics is also presenting a problem for investors, with little in the way of evidence that the delay to a new stimulus plan is causing damage to the US economy,” said Michael Hewson, chief market analyst at CMC Markets.
Brexit and economic data
The FTSE’s progress was hindered this morning by an empty economic calendar.
Connor Campbell, financial analyst at Spreadex, said it was “difficult for the European markets to get a feel for what direction they should be heading in”.
Instead, traders will be turning their attention to a string of data releases this week — including inflation and retail sales — that will provide further insight into the UK’s recovery from coronavirus.
“There appears to be an increasing nervousness, despite the gains of the last 100 days, that for all of the optimism over recent economic re-openings, that economies are reaching the limits of what they can do, without increasing the risk of a surging second wave of cases, as we head towards the autumn months,” said Hewson.
Brexit will also be back in the limelight this week as trade talks with the European Commission resume tomorrow.
Chief negotiator David Frost last week said an agreement could be reached in September.