The FTSE 100 has hit a 10-month high after soaring through the 6,800 barrier for the first time since the Covid-19 crash as investors cheered the Democratic win in the Georgia Senate election.
By 3.30pm the main London index jumped 229 points, or 3.2%, to 6,842 as it shrugged off the economic concerns around the UK’s latest lockdown to focus on oil prices hitting an 11-month high and a Democratic win in the Georgia run-off election adding to hopes for a ‘blue wave’ and a fresh round of US stimulus.
Banking stocks were, however, the day’s biggest winners, with Standard Chartered (STAN) sitting firmly at the top of the index after gaining 9.6% to trade at 511p. Barclays (BARC) moved 8.1% higher to 154p, HSBC (HSBA) gained 8.9% to hit 412p, Natwest (NWG) was up 6.5% at 166p, and Lloyds (LLOY) was up 6.2% at 37p.
Paul O’Connor, head of multi-asset at Janus Henderson, said a Democratic win in Georgia means markets were focusing on the prospects of more fiscal stimulus in the US in the short term.
‘Beyond fiscal policy, investor attention will now shift towards other areas of the Democrat policy agenda, such as infrastructure spending, minimum wage increases, and greater regulatory intervention in a number of key industries,’ he said.
O’Connor said investors will be ‘dusting off the blue-wave playbook’ but considering the need for 60 Senate votes to pass legislation, ‘it seems right to expect a light-blue version of the Democrat policy programme, rather than the most radical version’.
The prospect of a stimulus package may have buoyed European bourses but the Dow Jones was decidedly quieter, rising 1.2% to 30,770 although it will still be a record peak if it can close at that level.
Connor Campbell, analyst at Spreadex, said along with vaccine optimism, and oil prices, the Democratic win ‘lit a fire under all major western indices but super-charged the UK’s banking stocks’.
‘[FTSE] gains pushed it above 6,850, a price ironically and symbolically last seen just before the stock market crash that greeted the Covid-19 pandemic officially hitting the west last February,’ he said.
Whether developed markets can continue their upward trajectory will be tested later this week as US unemployment figures are released.
‘The US is heading for an unemployment wake-up call this Friday,’ said Campbell. ‘The non-farm employment change reading showed 123,000 jobs were lost across January, compared to expectations of a 60,000 increase.
‘This doesn’t bode well for Friday’s official non-farm figures, which has analyst forecasting an addition of just 65,000 – a bad number even in pre-pandemic times.’
FTSE soars 2.2% as US politics and oil prices cheer
The FTSE 100 soared 2.2%, racking up a third day of gains as energy stocks were buoyed by the price of oil jumping to an 11-month high and a rally in bank stocks.
The main market moved 146 points, or 2.2%, higher to 6,758 as energy stocks made early gains on the back of a surge in the price of crude after Saudi Arabia, the world’s largest oil exporter, agreed to cut production by 1m barrels a day in February and March.
Richard Hunter, head of markets at Interactive Investor, said: ‘At the current price of around $54 per barrel, Brent crude is still some way off its opening price in 2020 of $67, although significantly higher than the April nadir when it was trading at around $20.
‘This has been positive news for market heavyweights BP and Shell, whose prices have already added 11% and 10%, respectively, in the year to date.’
Banking stocks enjoyed a rally this morning, shrugging off any economic concerns about the UK’s fresh lockdown.
Standard Chartered (STAN) pushed to the top of the blue chips, climbing 9% to hit 508p, HSBC (HSBA) was up 7.2% at 406p. Barclays (BARC) added 7.3% to trade at 153p, NatWest (NWG) advanced 5.5% to 164p, and Lloyds (LLOY) was up 4.9% at 36p.
Spreadex analyst Connor Campbell said investors have ‘fully moved past Boris Johnson’s latest restrictions’ despite being stricter than the first lockdown in March last year.
‘Overfamiliarity tends to breed apathy in the markets, and that is just as true of Covid-19 headlines, which are more alarming now then they have been at any point in the pandemic, as it is of lockdowns,’ he said.
‘That and it appears the pull of the New Year’s vaccine hopes are stronger than any concerns over the economic impact of these fresh measures.’
US election news also played a part in the FTSE’s gains this morning as victory in the Georgia Senate election has already been called for Democrat Raphael Warnock over Republican candidate Kelly Loeffler, paving the way for an historic double victory.
Markets.com analyst Neil Wilson said markets are ‘front-running a higher yield environment driven by even-more expansionary US fiscal policy and higher taxes’.
The Democratic victory in the Georgia run-off election will leave Democrats and Republicans with 50 seats each but vice-president-elect Kamala Harris will have the tie-breaking vote.
Rupert Thompson, chief investment officer at Kingswood, said further stimulus ‘looks certain to be forthcoming’ but as most bills will need a majority of 60 rather than 51 votes it ‘should help contain market fears that the Democrats now have the power to implement some of their more radical and market-unfriendly policies’.
In investment trust news, the UK’s largest life sciences fund Syncona (SYNC) dropped 2.3%, or 6p, to 262p after updating on its portfolio company Autolus, which develops blood cancer therapies. Autolus plans to seek a partnership to fund its Auto3 programme, with headcount reduced by 20% to say $15m a year.
Berlin residential property fund Phoenix Spree Deutschland (PSDL) gained 1.2%, or 4p, to trade at 322p on the back of an upbeat update. The £305m fund has been selling off condos in the wake of tougher landlord laws affecting Berlin properties. Although the trust believes the new rent cap is unconstitutional, the Federal Court is not expected to reach a decision until later in the year.