FTSE climbs to two-yeah high amid hopes for economic recovery
London’s benchmark index closed 0.9% higher, adding to last week’s gains and rising to levels last seen in late January 2020 just before COVID-19 struck. The French CAC (^FCHI) also soared 0.9% and the DAX (^GDAXI) was 0.3% higher on the day in Germany.
The FTSE has been the standout performer this year so far, up just over 2%, driven largely by energy, basic resources and banking stocks.
“The UK had its share of economic data to guide the path,” Kunal Sawhney, chief executive of Kalkine Group, said. “The November GDP data of 0.9% showed that growth was in a better position than the pre-pandemic levels, and that will help markets to firm up this week.
“There has been a continuous decline in COVID cases and also UK Health Security Agency’s latest risk assessment showing Omicron relatively being mild for most adults will boost morale.”
Read more: ‘Fuel stress’ to hit 6 million UK households as energy bills soar
It came as Chinese president Xi Jinping warned of rising inflation risks in a virtual speech to open the World Economic Forum’s Davos Agenda.
He said that emerging markets could suffer if central banks tighten monetary policy to tackle inflation, calling for world leaders to continue to embrace cooperation to defeat the coronavirus pandemic.
“If major economies slam on the brakes, or take a U-turn in their monetary policies, there will be serious negative spillovers,” he said.
“They would present challenges to global economic and financial stability, and developing countries would bear the brunt of it.”
Across the pond, S&P 500 futures (ES=F) were up almost 0.1%, Dow futures (YM=F) were 0.1% higher and Nasdaq futures (NQ=F) were 0.1% down.
Wall Street stocks have had a slow start to the year so far, with the S&P 500 and the Dow both finishing lower for the second week in a row, although the Nasdaq managed to eke out a weekly gain, despite touching a three-month low earlier in the week.
“For a good part of this year there has been rising anxiety on the part of US investors especially about the likely path of US rate rises this year, as concerns about more persistent inflation levels prompt more aggressive talk from members of the Federal Open Market Committee (FOMC) about the likely path of rate rises this year,” Michael Hewson of CMC Markets said.
US markets are closed on Monday for Martin Luther King Day.
Watch: Markets continue their slide as Fed releases minutes
Asian share markets were choppy on Monday as a slew of Chinese economic data revealed the recent effect of COVID restrictions on consumer spending, prompting Beijing to again ease monetary policy.
In Japan, the Nikkei (^N225) climbed 0.7%, after losing 1.2% last week, while the Hang Seng (^HSI) fell 0.7%, and the Shanghai Composite (000001.SS) rose 0.6%.
China’s fourth quarter GDP figures came in at an annualised 4% year-on-year in October-December, amid a combination of port disruptions due to COVID restrictions, supply chain issues, as well as surging power costs and enforced shutdowns of the Chinese economy. This was the weakest expansion in 18 months.
Read more: Former Lloyds boss Horta-Osorio quits Credit Suisse after investigation
Retail sales growth slowed sharply to just 1.7% year-on-year in December, down from 3.9% previously.
Louis Kuijs, head of Asia economics at Oxford Economics, said: “Consumption remains the weakest link in China’s growth story at the moment and that will by and large continue for much of this year.”
“We think Beijing has a bottom line of around 5%. As is the case at the moment, if growth is weaker than that, they’d feel strongly motivated to pursue more policy easing.”