The FTSE 100 rallied again on Wednesday as Monday’s selloff increasingly looked like a flash in the pan. Global equities have stabilised, and bargain hunters are snapping up beaten-down shares.
Traders would have been watching the Japanese Nikkei overnight for clues of global investor sentiment after a 12% drop on Monday and a subsequent 10% rally on Tuesday. The index gained 1.2% overnight, providing a semblance of calm as the European session got underway, helping the FTSE 100 rally 0.7% in early trade on Wednesday.
“The FTSE 100 took succour from a continued recovery in Asian and US stocks overnight to trade appreciably higher on Wednesday morning,” said AJ Bell investment director Russ Mould.
“Although with warnings that the unwinding of carry trades – seeing people borrow at low cost in one currency to achieve higher returns from investments in another – are still to fully play out, there remains an air of tension around financial markets.
“Helping to provide at least a measure of calm was the Bank of Japan. Deputy governor Shinichi Uchida signalled there was no plan to increase interest rates further ‘for the time being’ after the yen surged on the second Japanese rate hike in 17 years last week.”
Housebuilders were on the front foot on Wednesday after Halifax data showed average UK house prices picked up in July after a soft June. Persimmon rose 2%, Taylor Wimpey gained 1.6%, and Barratt Developments perked up 1.8% on the news that UK house prices rose 0.8% in July.
“After a bit of a washout for the property market earlier this summer, the sun finally came out in July. This could be a sign of things to come, because the interest rate cut this month could help warm buyers up for a hotter autumn,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.
“July’s price growth came alongside a slight easing in mortgage rates, as the market priced in an August rate cut. The cut came on cue, and is likely to mean modest price growth through the rest of 2024. However, it’s not going to be a patch on the boom of recent years.”
The FTSE 100’s rally was broad, with all but 11 shares in positive territory at the time of writing.
Glencore was 2% higher after announcing it would stick with its coal business after floating the idea of disposing of it earlier this year. Lower coal prices were instrumental in a sharp decline in the miner’s first-half EBITDA, although investors are clearly upbeat about the future outlook for the unit.
Falling revenue less pass-through costs sent WPP to the bottom of the leaderboard as the advertising giant fell 2%.