The FTSE 100 was comfortably higher on Friday as European stocks tracked US stocks higher after the S&P 500 closed at record highs.
A strong US tech sector built on a general optimism around the global economy to help fuel a broad equity rally that was felt on both sides of the pond.
As major Western banks started to cut rates, there was a feeling that China was the missing piece in the global growth story. The US is slowing, but not dramatically. Europe is softer, although there are no major concerns.
China has been the nagging doubt, and the decision to hold off on major stimulus until now had elevated these doubts to real concerns about how the property slowdown in China would play out and ramifications for the global economy.
With China now acting to help the ailing property sector – which China’s wealth effect is reliant on – global investor sentiment has rocketed higher this week.
The S&P 500 hit fresh record highs overnight, and if it weren’t for BP and Shell shares falling through the floor with oil prices, the FTSE 100 would likely have tested record highs this week as well.
Strong economic data from the US and a resurgent semiconductor sector helped propel US stocks amid wider optimism.
“A better than expected read out for weekly jobless claims helped allay fears of cracks in the labour market. There was also some relief that the final print for second quarter GDP growth was held firm at 3%,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“Semiconductor stocks also rallied led by memory chip maker Micron’s surge of 14.7%. after it released revenue guidance above market forecasts. This saw the optimism spread eastwards with Korean rivals Samsung and SK Hynix also seeing strong gains, topping off a strong week for Asian equities where a stimulus blitz unveiled by China’s government and central bank has seen Chinese equities enjoy their best week in over 15 years.”
Prudential was again the riser in London as the China trade continued in Friday’s session.
UK retailers were also enjoying the feel-good factor with Frasers Group and Sainsbury’s joining the rally.