The FTSE 100 rebounded and stocks saw a widespread rally as Russia stepped in to resolve the gas crisis and stabilize energy prices while U.S. lawmakers seemed closer to an agreement to avoid a sovereign default.
The main market rebounded 1%, or 73 points, to hit 7,069 at 8:20 a.m., making up for steep losses yesterday as a surge in gas prices – which hit record highs – fueled the fire of inflation problems.
Richard Hunter, Head of Markets at Interactive Investor, said risk appetite has “temporarily returned … although sentiment is still cautiously balanced.”
Investors were pleased to hear that Russia may increase gas supplies and stabilize energy prices, which are “the main culprit for the current volatility”.
“The rise in energy prices has unsettled investors from both a growth and inflation perspective,” said Hunter.
“Concerns about the timing of the Federal Reserve’s throttling have been further mixed up as higher energy prices could both dampen economic growth and boost inflation, which is already high.”
Another catalyst for profits was the progress made in the US debt ceiling talks. Lawmakers are embroiled in a battle to lift the country’s debt limits that determine how much the US government can borrow.
Treasury Secretary Janet Yellen has warned that the government will exceed that limit in less than two weeks, leading Republicans and Democrats to an impasse on whether to borrow more. If the US breaks the ceiling, it would default on its debt – which currently stands at $ 28 trillion (£ 21 trillion).
Overnight talks suggest that a temporary deal is being worked on to avoid a default, which Hunter said “gave the markets a chance”.
Mining stocks led the rally, with Antofagasta (ANTO) high on the top of blue chips after adding 4.2% or 55p to trade at £ 13.37. Anglo-American (EEL) rose 2.8% to £ 25.98 and Glencore (VALLEY) added 1.9% and reached 367p.
The FTSE 250 also rebounded, 0.79%, or 176 pence, to 22,563, with the mid-caps led by private hospital operators Spire Healthcare (SPI), which is up 3.4%, or 7p, to 224p.
Workplace (WKP) rose 1.6% to 811p after the flexible office space provider released a second quarter update that showed demand has improved, with like-for-like rent up 2.1% and occupancy down 2.7 % has increased. Graham Clemett, Workspace CEO, said “It’s great to see London come back to life”.
Mid-cap investors should enjoy the rally today as Hunter warned: “The perceived slowdown in the momentum of the UK economic recovery, particularly given the removal of various government support programs, has been particularly detrimental to the more domestically-focused FTSE 250”.
KKV-secured loan (KKVL) declined 4.5% to 15p after a number of loans were settled or sold. Two loans in the C-share portfolio that provided regulatory capital to a US insurance company were raised for $ 4 million.
FTSE bounces back as Russia steps in to calm the energy crisis