Markets live: Wall Street bull run resumes as FTSE 100 pushes higher
Wall Street continued its winning streak as markets opened this afternoon after the FTSE 100 shrugged off dour UK GDP data to push higher.
The blue chip index closed up 2.20 per cent at 6,289 points, marking a three-week high.
Traders shrug off recession
It comes after official data showed UK GDP shrank 20.4 per cent in the second quarter as the impact of the coronavirus lockdown set in.
According to the Office of National Statistics (ONS), the economy is now 22.1 per cent smaller than it was at the end of 2019.
The decline was largely driven by a 20 per cent fall in output in April — the biggest monthly decline on record.
However, traders may have been reassured by signs of recovery in May and June, with GDP picking up 8.7 per cent in the latter.
“While that still leaves the UK way off where it was pre-pandemic, it has sparked hopes that the country can turn the ship around,” said Connor Campbell, financial analyst at Spreadex.
Connor Campbell, financial analyst at Spreadex, said there were a number of reasons for the FTSE’s gains, including marginally better-than-expected GDP figures, strong performance by oil majors and a calming of US-Sino tensions.
“Vaccine chatter also provided an underlying cause for optimism,” he said.
“Though it was probably news the US has bought 100 million doses of Moderna’s potential covid-19 treatment for $1.5 billion, rather than the speculation over the safety or effectiveness of Russia’s reported vaccine.”
Russ Mould, investment director at AJ Bell, agreed that the disastrous figures had been “met with a shrug… as it had been widely anticipated”.
Neil Wilson, chief market analyst at Markets.com, said: “Having been out and about over the last three weeks, I can safely say there will be more recovery recorded in July and August.
“But getting back to 2019 levels of activity is going to take a very long time as we see permanent impairment in certain sectors of the economy, as well as behavioural and social changes.”
Elsewhere Germany’s Dax gained 0.86 per cent to hit 13,058 while the French Cac 40 rose 0.90 per cent to 5,073.
Wall Street marches on
The optimism carried over into New York trading this afternoon as the three major indices resumed their bullish run.
The S&P 500 picked up its ascent towards record highs, rising 1.27 per cent by mid-afternoon.
The Dow Jones and Nasdaq also started strongly, gaining 0.78 per cent and 2.02 per cent respectively.
Wall Street had stumbled with a late-night sell-off yesterday, when jitters in the tech-heavy Nasdaq pulled back Wall Street from its rampant run of good form.
But optimism about a US stimulus package and a potential capital gains tax cut from US President Trump appeared to return in today’s session.
“US markets appear to have shrugged off the last nights late concerns over the prospects of a stimulus deal with a fairly strong rebound on the open, with the focus still on the underlying earnings outlook, after the latest US CPI numbers for July showed that inflationary pressures in the US economy appear to be on the rise,” said Michael Hewson, chief market analyst at CMC Markets.
Mould added: “Continuing hopes for a vaccine and the prospect of a big stimulus package in the US are enabling investors to look past the global coronavirus crisis to the sunny uplands of recovery.”
FTSE risers
Car insurance specialist Admiral led the FTSE risers this morning as shares picked up more than five per cent.
The Cardiff-based firm reported a 30 per cent rise in pre-tax profit to £286.1m for the first half despite turnover dropping four per cent.
Investors were also cheered by Admiral’s decision to pay out a dividend of 70.5p per share.
Just Eat rose more than four per cent in morning trading after posting a huge 44 per cent rise in revenue thanks to increased takeaway sales during the coronavirus lockdown.
Chris Beauchamp, chief market analyst at IG, pointed to gains for key stocks such as Shell and HSBC.
“The former has gained thanks to renewed strength in the oil price, while a lack of further developments in US-China tensions has allowed HSBC and Asian peer Standard Chartered to make up some lost ground,” he said.