The FTSE 100 carved out gains on Thursday as sentiment improved, but investors should be wary gains for Uk stocks in recent sessions have quickly been sold into as choppiness after the US election persists.
US CPI released yesterday has weakened the pound against the dollar and supported the FTSE 100’s overseas earners, leading to a 0.5% rise for London’s leading index.
“The FTSE 100 ticked higher in early trading on Thursday despite weakness in the US and Asia overnight as American inflation edged higher,” says AJ Bell investment director Russ Mould.
“While the consumer prices reading wasn’t alarmingly high, it helped to stoke strong performance for the dollar again.”
Attention is starting to shift back to interest rates after the fanfare of the US election, and sticky US inflation has increased the chances of another US interest rate hike next month.
“With post-election clarity and seasonal optimism fuelling markets, investors are looking to Fed Chair Powell to don his best Santa outfit and deliver a rate cut next month, with markets giving odds of a cut at around 83%,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“CPI data came in as expected, easing inflation concerns that had nudged yields higher, though core inflation remains somewhat persistent. While semiconductors faced pressure, nearing a 10-month low relative to the S&P, stronger odds for a December lifted the broader index as markets wait eagerly for a gift from the Fed to cap off the year.”
The FTSE 100’s gains were fairly broad, with around 70% of the constituents trading in positive territory at the time of writing.
After releasing a reassuring trading update, Spirax Group was the FTSE 100’s top riser on Thursday with a 5% gain. Investors were desperate for some reassurance after the share price had more than halved from the 2021 highs, and this came in the form of robust organic sales growth for the first ten months of the year, which were higher than the comparable period last year. That said, the company will need to deliver further improvement in the coming quarters to bring down the fairly rich earnings multiple.
ConvaTec was the top faller as investors booked profits after the healthcare group surged earlier this week.
Aviva was another standout performer, gaining 4.8% on strong third-quarter results. The group enjoyed growth across all business units, particularly in the retirement and wealth.
“Insurance giant Aviva sounded pretty confident alongside third-quarter numbers, and the details contained within them mean it has every right to be,” Russ Mould said.
“The company is seeing strong performance across all of its business lines. Insurance is doing well thanks to disciplined pricing over the last 12 months while the company continues to see growth in its wealth management arm.
“Encouragingly, Aviva’s growing customer base now often has more than one policy per household. Increasing the proportion which do is an obvious growth opportunity for the business.”