The FTSE 100 was 1% higher in Monday trade as the market recovered from last week’s selloff after Bank of England and US Federal Reserve decisions to hike rates.
“Following last week’s brutal session for stocks globally, a 0.2% rise in the FTSE 100 is a good enough reason to be more optimistic about the equities market. Stability often comes before recovery and markets being more composed would suggest investors are no longer panicking,” said AJ Bell investment director Russ Mould.
Stocks rebounded after a dramatic decline, with cyclical sectors such as energy and financials on the move.
Retail companies were surprisingly on the rise despite the continued cost of living crisis as the UK speeds towards 11% inflation in autumn. Next shares were up 0.9% to 5,992p and JD Sports Fashion shares rose 0.4% to 106.8p.
“Fears over a slowdown in consumer spending have hurt shares in retailers and leisure operators in recent weeks, so it was interesting to see many of these stocks among the top risers on Monday,” said Mould.
Meanwhile, IAG shares gained 3.3% to 116.2p despite the slate of cancellations across UK airports as customers flocked to airlines for the summer holidays, and hospitality company Whitbread saw an uptick of 1% to 2,633.5p as the Premier Inn owner enjoyed a rise in holiday demand.
“International Consolidated Airlines … Next and Whitbread were among the FTSE 100 stocks nudging ahead.”
Hargreaves Lansdown senior investment and markets analyst Susannah Streeter added: “British Airways owner IAG is also flying higher … But the overall turbulence affecting the industry is continuing.”
“Capacity problems affecting airlines show little sign of easing any time soon, with fresh cancellations due to baggage handling faults now appearing on screens at Heathrow. [The] headwinds now constraining summer operations will be another delay to long awaited recovery for the industry.’’
Housing stocks fell as the Bank of England’s interest rates hike to 1.25% seemed to finally put a dent in the gravity-defying industry. Barratt Development shares dropped 3.5% to 454.9p, Berkeley Group shares declines 3.5% to 3,754p, Persimmon shares slid 3% to 1,878p and Taylor Wimpey shares dipped 2.5% to 117.8p.
Associated British Foods shares rose 0.5% to 1,618p after the company reported a Q3 revenue growth of 32% to £4 billion on the back of rising prices and Primark stores reopening after the Covid-19 lockdown.
Meanwhile, mining stocks dropped on widespread fears of an economic slowdown, with Anglo American falling 0.7% to 3,321.2p, Antofagasta dipping 0.4% to 1,268.2p, Endeavor dropping 0.6% to 1,783p, Fresnillo sliding 0.7% to 795.7p and Rio Tinto declining 2.1% to 5,068p.
Iron ore prices fell 9% in China overnight and started a route in the miners that spilled over into this morning’s session.
“Uncertainty about the global outlook is also weighing on miners and commodity firms with Rio Tinto, Anglo American, Antofagasta and Glencore among the fallers in early trade on the FTSE 100,” said Streeter.