FTSE 100: London markets edge higher after Monday’s massive sell-off
London markets edged higher and US equities rebounded after yesterday’s sell-off, as analysts hoped that some “normalcy” was returning to markets.
The FTSE 100 closed 0.23 per cent higher at 8,026.69 during a volatile day of trading while the midcap FTSE 250 rose 0.65 per cent to hit 20,367.70.
On the FTSE 100, gains were led by banks, following positive results from the Bank of England’s resolvability assessment, while travel companies also gained on the back of a strong earnings report from Intercontinental Hotels Group.
Both indexes recorded big falls yesterday, dropping around 2.0 per cent and 2.8 per cent respectively.
Equity markets around the world were caught up in a major sell-off yesterday reflecting concerns that the world’s largest economy might be on the cusp of a downturn, but thinks have looked more hopeful on Tuesday.
Stocks in Japan were hit the hardest yesterday, with the Nikkei 225 and the Topix both dropping by 12 per cent, marking the worst day since 1987. However, both increased by nearly 10 per cent overnight.
US markets also saw a rebound on Tuesday. Shortly after the opening bell, the S&P 500 was up 1.3 per cent while the tech-heavy Nasdaq also rose 1.3 per cent.
“Some normalcy has started to return to the markets,” Mohit Kumar, analyst at investment bank Jefferies said.
The sell-off began after a disappointing jobs report last Friday and some weak survey data earlier in the week. This raised the prospect that the US economy was faring worse than expected.
Markets now think that the US Federal Reserve will cut rates by 1.25 basis points in the rest of 2024. Some analysts even think that the Fed could announce an emergency rate cut to stop the economy from turning over.
“Downside surprises in economic data have amplified fears that the US Federal Reserve (Fed) has left it too late to begin its rate cutting cycle,” Kallum Pickering, head of research at Peel Hunt said.
Despite the sell-off, Matt Britzman, senior equity analyst at Hargreaves Lansdown was fairly hopeful that “calmer waters” should prevail as many of the longer-term growth trends, such as AI, remain intact.
“The good news for longer-term investors is that no single piece of this puzzle warrants such a massive shift in sentiment, this looks to be more about a perfect storm of factors,” he said.