Record highs in US stocks do wonders for investor sentiment, as was the case on Wednesday after another strong session across the pond helped lift European stocks.
Upbeat earnings from Netflix raised hopes tech stocks could provide a catalyst for another leg higher in global equities. At the same time, reports of possible Chinese stimulus sent the FTSE 100’s China-focused stocks sharply higher.
“The FTSE 100 got off to a strong start on Wednesday as US stocks continued to test new records with earnings season getting underway in earnest,” said AJ Bell investment director Russ Mould.
“Reported plans for a big intervention to help restore investor confidence in China helped lift shares with ties to emerging markets including insurer Prudential, banking outfit Standard Chartered and miners.”
The FTSE 100 was 0.3% higher at the time of writing in range-bound trade.
One eye on the UK economy
London’s leading index wobbled briefly earlier in the session following the release of upbeat UK services. Better than expected UK Services PMI data sent the pound higher against the dollar as the all-important service industry showed signs of expansion. Notably, employment in the sector was robust, supporting a healthy picture of the UK economy.
While this is excellent news for the economy, it’s not necessarily good news for stocks.
A rising pound tends to cap gains for the overseas-weighted FTSE 100, and a strong services sector reduces the need for the Bank of England to cut interest rates in the near term to support activity.
Trade on Wednesday represents the gyrations investors should become accustomed to in the coming months as anticipation around the first interest rate cut builds.
FTSE 100 movers
Reports of Chinese stimulus helped propel the miners higher on Wednesday, with the sector dominating the top risers. Fresnillo stormed nearly 6% higher and was the top gainer, closely followed by Endeavour Mining.
Copper miner Antofagasta was in demand as shares rose over 5%. Diversified miners Anglo American and Glencore gained between 2.6% and 3.3%.
Companies with strong ties to China, such as Burberry and Prudential, also showed well on Wednesday.
The risk-on trade was demonstrated by weakness in defensive names such as pharma groups Haleon and GSK.