The FTSE 100 made healthy gains on Thursday as investors focused their buying on cyclical sectors, including housebuilders and miners.
Yesterday’s UK inflation data unleashed a wave of buying of UK property stocks, spilling over into a second session. Miners joined the action on Thursday, with Anglo American and Antofagasta topping the FTSE 100’s gainers list.
“After yesterday’s spectacular session for UK stocks, it was refreshing to see further gains on Thursday. The FTSE 100 nudged up 0.6% to 7,632 thanks to strength among miners, and investors continue to shop for bargains among the housebuilders. However, market sentiment can turn quickly and investors have a habit of finding things to worry about,” says Danni Hewson, head of financial analysis at AJ Bell.
“The corporate reporting season went into overdrive with updates from a multitude of players large and small across the UK, mainland Europe and the US. So far, there have been mixed messages, particularly from the tech sector, and pre-market indicative prices suggest the US market will open in the red later today.”
On Thursday, Netflix and Tesla were among technology shares set for a lower open.
“It seems Tesla and Elon Musk are not done with price cuts. For now, the company’s industry-leading margins are holding up better than feared, however guidance for further reductions and the prospect of factory downtime affecting production has led a share price which has been motoring all year to splutter a little,” Hewson said.
“Tesla is still in an enviable position in the electric vehicle market which is why so many investors are along for the journey even if there may be some bumps in the road in the short term.”
Netflix shares were lower after reporting lower than expected revenue despite attracting 5.9 million more subscribers due to a crackdown on password sharing.
Short-lived respite?
The investor worries Hewson mentioned may be channelled back into food prices as quickly as they were alleviated after yesterday’s inflation data.
Russia has attacked Ukrainian grain stores after their agreement to safeguard grain exports expired. The attacks sent grain futures sharply higher, which could translate to higher food costs globally.
“Just as painful food inflation was beginning to ease, Russian attacks on grain storage facilities in Ukraine risk causing another spike in costs of staple ingredients,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“Wheat futures have jumped after missiles were fired at infrastructure, following Moscow’s decision to leave the Black Sea Grain deal. Hopes that a fast deal to revive the pact could materialize are dissipating, with Russia’s position appearing more intractable after it said that any ships heading Ukrainian ports will be considered carriers of military cargo and attacked.”
The conflict in Ukraine exacerbated the cost of living crisis and now threatens to pile the pressure back on households just as conditions started to ease.
There was little reaction to developments in Ukraine in UK stocks on Thursday. This could change quickly.