The FTSE 100 surged on Tuesday after the Federal Reserve said it would start buying individual corporate bonds in the primary market, a move that triggered a wave of optimism through markets.
The move followed sharp declines in equities on Monday caused by fears over a second wave of coronavirus.
Some analysts were sceptical about the Fed timing and pointed to a market that was now, more than ever, driven by central bank actions.
“What seemed like a significant turn lower for equities has turned into another bounce, with the Fed and BoJ actions overnight providing the catalyst for the revival in risk appetite,” said Chris Beauchamp, Chief Market Analyst at IG.
“While the timing of the Fed’s moves will be viewed as somewhat suspect, given that it comes just as the Vix spikes and equities take a dive, the reality is that activist central banks are a feature, not a bug, and will remain the driving force for markets thanks to the boost to liquidity and confidence that these provide.”
“When, as now, economic and corporate data is so dire, then it is up to central banks to step in to bridge the gap in economic activity. Equity rallies are a side effect, and not the chief object, of these central bank moves, but the mantra ‘do not fight the Fed’ is still as powerful as it ever was,” Beauchamp said.
Plant hire company, Ashtead, was one of the FTSE 100’s best performers after it released earnings and maintained the dividend.
“While recent performance has been mixed, the firm will be key beneficiary of a sustained recovery in activity in the US, although a rise in virus cases will certainly provide a cause for concern in the near term,” said Chris Beauchamp.
“But as one of the big winners of the last few years, Ashtead should remain near the top of UK investor watchlists.”
Travel shares were the among the other top risers that rebounded after a sharp fall yesterday, demonstrating the whipsawing nature of some stocks that has led commentators to coin the phrase ‘Kangaroo’ market, due the frequency of stocks bouncing up and down.