Strong markets in Asia and the US pulled the FTSE 100 up 0.1% to 7,483.5 in a wave of optimism as investors held their breaths for news from the Jackson Hole convention today.
The Hang Seng soared 3.6% to 19,968.3 and the SSE Composite index gained 0.9% to 3,246.2.
US markets were positive in pre-open trading, with the Dow Jones rising 0.25% to 33,042, the NASDAQ increasing 0.6% to 13,017.7 and the S&P 500 gaining 0.5% to 4,166.5.
Analysts have been projecting a hawkish direction from US Federal Reserve chair Jerome Powell in his speech tomorrow, with markets expecting further aggressive interest rate hikes.
US inflation fell to 8.5% from 9.1% last month, ushering in some hope that the Fed would take a less intensive stance in its next interest rates meeting. However, the US is far from out of the woods, and investors are hedging their bets towards bad news from Powell tomorrow.
“The FTSE 100 took its cue from strong trading in the US and Asia to make gains on Thursday morning as investors await the crunch Jackson Hole summit in Wyoming,” said AJ Bell investment director Russ Mould.
“There’s a lot riding on US Federal Reserve chair Jerome Powell’s address tomorrow. Speculation is running so hot ahead of his remarks that it feels like even subtle variations in intonation could make a difference to jittery markets.”
“Investors appear to be factoring in a pretty aggressive stance from Powell already, anticipating rates going higher and staying there for longer to get inflation under control.”
The markets have been rather quiet over the last week, as investors await Powell’s signal on which direction to move.
“Any suggestion the Fed might ease up a bit would likely spark a very positive response in the markets, but if Powell goes the other way and is even more hawkish than many have been predicting, it could exacerbate the recent wobble in markets,” said Mould.
Energy companies
Shell shares gained 1.6% to 2,330.2p despite coming under fire following Ofgem’s report that the energy giant had overcharged 11,275 customers on prepayment accounts from January 2019 to September 2022.
The company voluntarily reported and rectified the error, and is set to pay £106,000 to UK households and £400,000 to Ofgem’s voluntary consumer redress fund, along with £30,970 in goodwill payments to impacted customers.
“Shell’s overcharging of its retail energy customers won’t have done it any favours during a crisis which is putting its mega-profits under the microscope,” said Mould.
“Tomorrow’s increase in the UK price cap will paint a fuller picture of just how acute the pressure from energy bills will be on households this winter.”
“The scale of the crisis is almost certain to demand a pretty ambitious political solution and one which the energy producers themselves might not like.”
Meanwhile, Centrica shares fell 1.3% to 81p after the British Gas parent company announced it would deliver 10% of its profits to help the most vulnerable UK families survive harsh energy prices over winter this year.
“British Gas owner Centrica is, in rather piecemeal fashion, looking to do its bit to pre-empt action from regulators and the Government, by donating 10% of profits to a fund to help ease the pain for the poorest households,” said Mould.
CRH
CRH hit the ground running as its shares gained 2.6% to 3,213.7p after the building materials company reported a 14% sales growth to $14.9 billion in HY1 2022 against $13.1 billion year-on-year.
The group also confirmed a 21% EBITDA climb to $2.2 billion and a 0.9% EBITDA margin rise, despite inflationary headwinds.
CRH hiked its dividend 4% to 24c for the interim term.
“Building materials firm CRH demonstrated its pricing power as first half earnings were up an impressive 13%, driven by double-digit price increases,” said Mould.
“The company’s exposure to big infrastructure projects provides it with some insulation against any economic downturn.”
