“The FTSE 100 has got that Friday feeling, soaring to a 21 month high late morning as the repercussions from the surprise Bank of England decision to leave interest rates unchanged reverberated on financial markets. The continued sell off of sterling which hit its lowest level against the dollar in more than a month, is partly behind the rise in the blue chip index. Multinationals listed earn big chunks of revenues overseas, so benefit from the pound’s lower value. But the financial markets are also hooked on the drug of cheap money, so the news that the drip won’t be immediately withdrawn in the form of higher interest rates, led to a fresh burst of euphoria, before seeping away a little.
Q3 2021 hedge fund letters, conferences and more
The US Jobs Report Bring Good News For FTSE 100
The US jobs report got the party started again, coming in much more upbeat than expected. Employers added 531,000 new jobs to payrolls in October, higher than the 450,000 forecast. Although this bodes well for the recovery in the US, the rise in earnings year on year of 4.9% does highlight worries about wage inflation. But the numbers aren’t likely to be hot enough to blow the Federal Reserve off its course of gradually tapering its stimulus programme. Chair Jerome Powell has already said that employment needs to continue to recover strongly before an interest rate hike comes closer on the horizon.
Aircraft engine manufacturer Rolls-Royce Holding PLC (LON:RR) was one of the biggest gainers on the FTSE 100, flying into much brighter skies, as expectations of a rebound in international travel continue. That was fuelled by an update from International Consolidated Airlns Grp SA (LON:IAG), British Airways owner today, with the company saying it was optimistic given the reopening of transatlantic routes. However concerns about its high debt load have held back a much sharper trajectory of its share price today. Informa, the international conference provider is also riding high on the travel tailwind, with expectations that more lucrative in- person global events will begin to take place as an increasing number of flights resume globally.
The race for space has been continuing in the housing market, with the latest snapshot from the Halifax House Price Index showing the average price of a UK home has reached another all-time high. Yet there was a cooling off in house builder’s share prices, after yesterday’s mini boost from the Bank of England with Persimmon and Barratt Developments falling back. Investors are clearly questioning just how long the red hot market can continue for with wage pressures bubbling away and materials costs spiking amid expectations that interest rates will soon begin to rise."
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
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