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UK stock markets extended the gains on Tuesday, 16 February tracking the buoyant sentiments amidst the global equity investors with Japan’s Nikkei 225 hovering past its 30-year high. The renewed optimism around the upcoming corporate earnings in the week and the ongoing inoculation drive has seemingly rejoiced the market participants with an expectation of catalytic economic recovery.
London equities shine
The headline FTSE 100 pared gains partially in the mid-morning deals on Tuesday but was still trading in positive territory at 6,765.65, at around 1029 GMT, up 0.14 per cent, from the previous close of 6,756.11. In the intraday session so far, the index has shuttled between a high and low of 6,799.92 and 6,756.11, respectively.
Apart from today’s surge, the benchmark FTSE 100 has already amassed a gain of 5.44 per cent in February so far even with a 1 per cent GDP growth in Q4 FY20 and the Bank of England resisting to introduce a negative interest rate regime in its policy meeting in the first week of this month. Other broader stock indices have fared in a much similar manner with the FTSE 250, FTSE 350 and FTSE All-Share rising between 5.50 and 6.20 per cent.
GBP extends strength
Following the equities, the pound sterling has also gained strength in the present month against the greenback. The Great Britain pound (GBP) has staged a gain of more than 200 basis points against the United States dollar (USD) in February so far rising to a level above 1.39. At around 1036 GMT on Tuesday, the GBP vs USD pair was trading at 1.3924, up 0.15 per cent, from the previous close of 1.3903.
During the day so far, the currency pair has hovered between a range of 1.3902 and 1.3952, at the interbank foreign exchange market. The Bank of England had fixed a reference exchange rate of 1.3912 USD and 1.1467 EUR against a unit of pound sterling on 15 February.
Macro data and earnings steer markets
The Office for National Statistics is set to announce the CPI-based inflation figures for the month of January on 17 February, while the GFK consumer confidence is slated to be declared on 19 February. The dissemination of macroeconomic data weeks before the Budget presentation is likely to assist the London equities along with the guidance provided by the heavyweight companies.
Rio Tinto, British American Tobacco, Barclays, Smith & Nephew, Natwest Group and Segro are some of the major corporations that are scheduled to announce their Q4 and FY20 results in the present week. The extant pace of the vaccination programme has been quite eventful in restoring the lost confidence of the investors.
Vaccine optimism
In more than a three-month long jab distribution and immunisation, the healthcare authorities have vaccinated over 15 million people with the first dose across various jurisdictions in the United Kingdom, translating into a cumulative proportion of over 25 per cent of all the adults. The government is now focusing on vaccinating all the priority groups by May and all the adults by September this year as more vaccine shots are likely to be received in the second half of 2021.
Prime Minister Boris Johnson has recently said that the exact effectiveness of the vaccines in reducing the spread of infection can’t be ascertained as the authorities don’t have enough data. Irrespective of the large-scale vaccination programme, the rate of infection is still a worrying concern for the healthcare administration with around 1,600 people per day seeking hospital admissions.
The picture will be more clear in the forthcoming weeks as the UK is set to come out of the national lockdown restrictions. Reopening of businesses, and the rate of infection and the probable response of vaccines towards the mutated strain is likely to take a toll on domestic equities going forward.
