The FTSE 100 gained for a second day on Tuesday as investors bought cyclical stocks, including miners, retailers, and housebuilders.
London’s leading index was 0.3% higher at the time of writing. Although it’s too early to call a bottom on the recent correction that hit US stocks, the past two trading sessions would suggest investors are content the threat of a global trade war is suitably priced into equities.
US stocks rallied again overnight, setting the European session up for a positive start that gradually built momentum as the day progressed.
“UK markets have continued on the front foot, with yesterday’s close marking four consecutive days of gains for the FTSE 100, with another jump higher this morning. Positive earnings reports and growing optimism about China’s economic recovery helped lead insurers and miners to the forefront in yesterday’s session,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
With equities showing signs of stabilisation, traders will start looking forward to this week’s US and UK interest rate decisions and the forecasts of monetary policy and economic activity.
“This week, all eyes are on the Bank of England’s upcoming interest rate decision on Thursday, with markets pricing in a 90% chance of no change as policymakers navigate the challenging task of balancing slowing growth with sticky inflation,” Britzman explained.
Whilst it would be wise to be cautious going into this week’s central bank events, there are signs that risk appetite is improving, and tomorrow’s decision may prove to be a catalyst for further upside.
Improving sentiment was evident in the FTSE 100’s rally on Tuesday. The highly cyclical retail, mining and housebuilding sectors led the charge higher, with JD Sports topping the FTSE 100 leaderboard. JD shares were 3% higher at the time of writing.
Copper miner Antofagasta enjoyed another strong session on China stimulus hopes and gained 2%. Glencore rose 1%.
Housebuilders Barratt Redrow, Taylor Wimpey and Persimmon showed further signs of building a base after a recent sell-off with gains between 1%-2%.
There were also signs that investors were happy to take a little more risk as the ‘safer’ utilities sector experienced selling pressure. United Utilities was down 1% at the time of writing.