The FTSE 100 index was higher today as investors got some respite from the interest rate anxieties that briefly left the Nasdaq in “correction” territory during Wall Street trading yesterday.
The 10% fall since Nasdaq’s November high came amid heightened worries at the start of 2022 about monetary policy tightening by the US Federal Reserve.
A resilient finish to Wall Street trading last night and some positive updates from stocks including Electrocomponents, cyber security firm Darktrace and recruitment business Robert Walters resulted in a more positive session in London today.
FTSE 100 higher, Darktrace up 19% in FTSE 250
08:32 , Graeme Evans
The FTSE 100 index has risen 0.6% or 41.7 points to 7486.92, with Electrcomponents the best performing top fight stock.
Shares in the UK-based distributor of more than 500,000 industrial and electronics products jumped 5% or 63p to 1238p after a better-than-expected third quarter performance prompted it to raise profits guidance for the full year.
Electrocomponents was one of two companies promoted to the FTSE 100 index in December, with the other also on the risers board today.
Vets business Dechra Pharmaceuticals lifted 78p to 4378p as it announced it had bought the worldwide rights to verdinexor, a treatment for canine lymphoma in dogs.
Other stocks on the FTSE 100 risers board included Scottish Mortgage Investment Trust, which recovered 27p to 1166p after the heavy selling yesterday.
Flutter Entertainment, Next and plant hire business Ashtead were also up by more than 2%.
The FTSE 250 index, which rose 0.8% or 188.64 points 23,190, was powered by a spectacular return to form for AI-focused cyber security business Darktrace. The former FTSE 100 company surged 19% or 69.4p to 464.2p as it raised guidance for the 2022 financial year.
Why Matt Moulding is wrong about the short sellers
08:18 , Simon English
City Comment: There is a long, ignoble and quite funny history to big company bosses moaning about short-selling.
Back in 2006 Enron chairman Ken Lay blamed the collapse of the now notorious energy trader on those evil investors who dared to bet his shares would drop.
In 2008 HBOS said the shorts were undermining the bank by claiming it was going bust. It was and it did. The City watchdog, then the FSA, abandoned a brief inquiry into claims traders had profited illegally from shorting the stock, owing to lack of evidence.
Stock market optimism despite higher rates
07:54 , Graeme Evans
UBS Global Wealth Management expects three rate hikes from the US Federal Reserve this year, starting as soon as March.
Additional hikes in the following two years should take the rate to between 1.75% and 2% by the end of 2024.
However, UBS’s chief investment officer Mark Haefele believes there’s no reason to think the equity rally is about to end.
He said today: “Historically, stocks perform well in the months leading up to the first rate hike of a cycle. Since 1983, the S&P 500 has risen 5.3% on average in the three months before the first Fed rate hike.
“In addition, the normalisation of Fed policy shouldn’t dent the outlook for corporate profit growth, which is being supported by above-trend growth buoyed by strong consumer spending and still-easy access to capital.”
UBS expects only a gradual rise in rates and for the 10-year US Treasury yield to rise from 1.75% currently to 2% by June.
Markets steady ahead of Powell testimony
07:41 , Graeme Evans
Investors will be hoping for a calmer session after heightened interest rate tensions yesterday sent the tech-heavy Nasdaq down by as much as 3% in New York.
The sell-off came amid speculation that the US Federal Reserve might hike rates four times in 2022 starting from March, compared with previous hopes for two rises.
The rates outlook put pressure on the valuation of high growth stocks as the Nasdaq briefly entered correction territory with a 10% fall from its November high.
Shares later steadied after the US 10 year bond yield declined slightly to end a run of seven straight increases, having been above the 1.8% level for the first time since January 2020.
This meant the Nasdaq finished last night’s session marginally in positive territory while futures trading on Wall Street is pointing towards a more resilient start later.
The FTSE 100 index is also forecast to open 35 points higher at 7480.
Michael Hewson, analyst at CMC Markets, said attention will now focus on testimony from Federal Reserve chairman Jerome Powell at his re-nomination hearing with the Senate Banking Committee.
Hewson said: “There is a sense that markets might be getting slightly carried away when it comes to how aggressive the Fed might be in the coming months.
“We could get a better sense of where we are later today when Powell testifies to US politicians, when he is likely to face a lot of questions on the timeline and number of possible rates rises, as the US economy continues its recovery process.”
The prospect of tighter monetary policy has impacted the cryptocurrency market in recent days, with bitcoin at one point trading below $40,000 for the first time since September.