The FTSE 100 rallied on Wednesday as a strong dollar pushed down the pound ahead of the US rates decision. The weaker pound helped lift overseas earners and supported the index, helping to reverse some, but not all, of yesterdays drop.
The FTSE 100 was trading at 7,246, gaining 0.74% at the time of writing on Wednesday. The top gainers were dominated by companies who report in overseas currency such as the Dollar or Euro. The FTSE 100 oil majors were stronger, as were the miners.
BAE Systems was the top riser after a late night address by Vladimir Putin raised concerns of further escalation by Russia as they attempt sham referendums.
Asset managers and wealth managers gained as the market digested possible measures by the new UK Prime Minister this Friday. A reduction in tax and bigger bonuses for bankers will help ease the pressures of a slower economy on wealth managers.
Another big beneficiary of Liz Truss’s new measures could be the housebuilders, if she pushes through cuts to stamp duty.
Housebuilders surge
Following sharp declines yesterday, the housebuilders bounced back with Persimmon adding 4% while Taylor Wimpey and Barratts gained 3%.
However, analysts warned the short term benefits may be outweighed by the longe term impact on the housing market.
“Buyers are unlikely to be unhappy at the prospect of a tax cut, but if the government chooses to cut Stamp Duty in an effort to stimulate the housing market, there’s a risk it could do more harm than good,” said Sarah Coles, senior personal finance analyst, Hargreaves Lansdown.
“It’s easy to see why the government is concerned about the housing market. We’ve seen demand fall consistently since May, when rocketing bills, rising house prices and ever-increasing interest rates started to take a toll on buyer enthusiasm. There’s a risk that if rate rises accelerate, pressure on buyers could reach a tipping point, where demand dries up.”
“We know from very recent experience that a Stamp Duty holiday can stimulate demand. However, the only reason these holidays work is because people feel they have a small window of opportunity to take advantage, otherwise they’ll miss out. The point at which they think they can just wait for the next one, they will start to become less effective.”