The FTSE 100 was up 1% to 7,466.3 in midday trading on Monday, as investors moved into commodities stocks to shore up against rising inflation and recent inflation tech-heavy US market.
Optimism in Europe spilled over into US futures on Monday as indices bounced back from another week of losses last week.
“US indices clocked up their seventh week of losses in a row on Friday and the jitters around tech companies continued on Chinese markets with the Hang Seng sliding,” said Hargreaves Lansdown senior investment and markets analyst Susannah Streeter.
The cutting of a key interest rates by the People’s Bank of China failed to assuage concerns, as the initial relief last week diminished.
However, the slight easing of Shanghai restrictions gave way to some optimism, as the price of Brent Crude rose to $114 per barrel and families across the Atlantic geared up for summer holiday season.
“The benchmark Brent Crude rose 1% as supply concerns resurface particularly given the US traditional ‘driving season’ approaches, when families in thirsty pick-ups and saloons get onto the roads for holidays,” said Streeter.
Indeed, Shell and BP saw their shares gain on the market with a 1.8% uptick to 2,380p and a 2.4% rise to 427.2p, respectively.
Kingfisher rose 2.7% to 253.6p following its reported 16.2% increase in like-for-like sales compared to pre-Covid rates, alongside the launch of a £300 million share buyback programme scheduled to launch soon.
“Sales are proving more resilient than some might have feared. This suggests there is still some pent-up demand for home improvement despite the pressures on household budgets,” said AJ Bell investment director Russ Mould.
“Kingfisher has also benefited from market share gains as weaker rivals have faltered and its scale and financial strength should stand it in good stead for what promises to be a tricky consumer backdrop.”
“[The] decision to spend another £300 million buying back shares demonstrates a measure of confidence in the future.”
High commodity prices pulled mining companies up the FTSE 100, with Anglo American rising 3.8% to 3,659p, Antofagasta gaining 1.1% to 1,438p, Croda growing 2.6% to 6,908p, Endeavor shares up 2.6% to 1,893p, Fresnillo increasing 1.2% to 794p and Glencore enjoying a 3% increase to 512.3p.
Meanwhile, consumer goods felt the high cost of living continue to bite chunks out of its market share, with Sainsbury’s, B&M and Tesco falling 1.1% to 230.1p, 0.9% to 418.6p and 0.7% to 258.4p, respectively, as food inflation set into consumer budgets.
“The consumer spending shock is still unfolding, and we could see more pain for corporates and individuals in the coming months,” said Mould.
“Markets always price in what they think could happen, but it feels like there could be more gloom ahead.”
“Corporate profit margins are being squeezed and that could lead to reduced business investment which in turn could hurt the economy.”