FTSE 100 close: London rises on Fed official’s comments amid Israel-Gaza uncertainty
London’s FTSE 100 index soared as markets reacted well to comments by a top official at the Federal Reserve, despite ongoing uncertainty looming due to the war with Israel and Gaza.
The capital’s premier bluechip index closed 1.82 per cent higher at 7,628.21, lifted by Ocado, Anglo American and Flutter.
Down the most since March, the yield on benchmark 10-year US Treasuries fell 18 basis points to 4.62 per cent — while the two-year bond yield also dropped.
CMC Markets analyst Michael Hewson said: “US markets initially opened the week lower, however sentiment turned around after comments from Fed vice chairman Philip Jefferson that the central bank might need to be careful about further rate rises given the recent increase in yields.
“With US bond markets closed yesterday ..we’ve had to wait until today for US yields to play catch up with the rise in yields we saw on Friday getting quickly reversed, with yesterday’s comments from Fed policymakers playing into the lower yield narrative.”
In the UK, retail sales figures showed a major slowdown in September, in part due to the milder weather.
“Sales growth in September slowed as the high cost of living continues to bear down on households,” said British Retail Consortium chief executive Helen Dickinson.
“Big ticket items such as furniture and electricals performed poorly as consumers limited spending in the face of higher housing, rental and fuel costs. The Indian summer also meant sales of autumnal clothing, knitwear and coats, have yet to materialise.”
Meanwhile, Kantar’s latest figures showed that food inflation continued to slow, with butter falling in price by 16p on average.
“Investors regained their appetite for risk after a troublesome start to the trading week linked to concerns about conflict in the Middle East and how the associated hike in commodity prices could feed through to inflation and interest rates staying higher for longer,” said Russ Mould, investment director at AJ Bell.
War’s impact on commodities
Nicholas Earl
The FTSE was in the green early doors, despite the ongoing war between Israel and Gaza creating uncertainty in the markets. Oil, gold and gas have all been impacted, with the pound falling yesterday, as investors looked for safe-haven assets instead.
So far 900 Israelis are estimated to have been killed by terrorist infiltration and rocket fire into its territory. In response, almost 700 Palestinians are estimated to have been killed by retaliatory strikes on the enclave.
Amid the fighting, oil prices have soared, while there are also concerns Iran could face further Western sanctions, due to its backing of the terror group.
Iran supplies three per cent of global supplies and 20 per cent passes through the Strait of Hormuz, a fact which has raised supply shortage fears.
Brent Crude has largely consolidated the gains over the first two days of trading, priced at $87.54 per barrel this morning — down 0.74 per cent.
Gas prices have also surged across Europe, amid the renewed threat of further strike action across major LNG production sites in Australia.
There has also been a spike in commodity prices — with gold rebounding from a nine-day losing streak this month to rise over $20 per ounce. Investor sentiment turned with buyers looking for safe haven assets amid concerns of potential instability across markets.
Gold is currently priced at $1,858 per ounce in this morning’s trading, with analysts waiting to see whether sustained concerns over a hawkish Fed and a robust US dollar will be enough to weigh down the rally.