The FTSE 100 flirted with gains on Friday despite sharp declines in other major European equity indices which sank in a broad risk-off move.
The outperformance in the FTSE 100 also came after a surprise rate hike by the Bank of England yesterday.
The FTSE 100 was up 0.1% at 7,268 just after 12pm on Friday whilst the German Dax and French CAC were deep in the red, both down over 1%.
“The Bank of England surprised everyone by hiking interest rates yesterday. In doing so it only confirmed new Governor Andrew Bailey’s reputation as an ‘unreliable boyfriend’ after he flirted with a widely expected rise back in November before thinking twice, but the market seems to be taking this latest development in its stride,” says AJ Bell investment director Russ Mould.
“While the decision to move now seems at odds with the uncertainty around the economic impact of the Omicron variant, and rising rates are not typically good news for stocks, businesses and markets don’t love uncontrolled inflation either so the Bank of England at least trying to get a handle on things isn’t all bad news.”
The early rise in the FTSE 100 coincided with declines in the pound as London’s leading index once again displayed an inverse relationship with the pound.
The pound rose sharply on Thursday following the surprise rate hike and the fade trade was played out in the FTSE 100 on Friday.
The weaker pound helped support exporting stocks with consumer shares and the miners making reasonable gains in early afternoon trade on Friday.
UK banks also gained as investors continued to cheer the prospect of better performance as a result of higher rates.
Barclays, Lloyds and NatWest crept higher after surging yesterday.
Strong UK retail sales also created a sense of optimism as November retail sales rose 1.4%. However, the jump in retail sales could prove to be short lived as the rise was largely down to people doing their Christmas shopping early over fears of shortages.
This could set us up for a disappointing Christmas trading period, especially if Boohoo’s troubles are a reliable barometer.