On Tuesday, shares in the UK finally steadied, as financial stocks gave some positive impetus and there were a number of earnings updates that came out quite strong. This came a day after the British stock indexes had been dragged down due to concerns of a slowdown in the economy for the fifth straight session.
Stock indexes go up
By 0817 GMT, there was a 0.3% increase in the FTSE 100, as shares in HSBC, the British bank focused on the Asian market, rose by 3% to give the blue-chip index its biggest boost. There was also a 0.8% and 1.4% increase in oil majors Shell Plc and BP Plc, respectively, as they tracked volatile prices of crude.
There was a 0.2% increase in the FTSE 250 index, which is domestically focused, and it came down to its lowest level in the last three months. There has been a great deal of volatility seen in the global stock markets as well, as bets of an aggressive monetary policy from the central bank for quelling inflation are high. Moreover, the Ukraine crisis has also fueled worries about a global economic slowdown.
Even though these fears are growing, there has only been a 2.1% drop in the FTSE 100 year-to-date. Meanwhile, there has been a 15.4% drop recorded in the STOX 600 index and the US S&P 500 index has declined by 21.3%. This is because they are heavily weighted in mining and energy companies, while the UK index has more value stocks.
Trend to continue
Market analysts said that this outperformance is likely to continue in the FTSE 100. This is because with inflation rising, people are looking for assets that are closely related to real world one for safety against inflation. The best option in this regard is commodities.
Moreover, the bond market in the UK has not seen such dramatic moves because investors believe that the Bank of England (BoE) is not just only going to focus on inflation. They have priced in the central bank also worrying about economic growth when deciding its policies.
On Thursday, it is expected that the interest rate will be jacked up by the Bank of England by 25 basis points, which will bring it to 1.25%. There was an 8.5% increase in Paragon Banking, after it upgraded its forecast for 2022. It also disclosed that lending growth was quite strong. There was also a 6.2% increase recorded in the share price of Crest Nicholson, as the housebuilder forecasted higher profits after adjustment.
A 4% rise was also recorded in DiscoverIE Group after it disclosed that its full-year pretax profit had turned out to be stronger. This is good news for the electronic component supplier and manufacturer in these market conditions. Meanwhile, the British currency has continued its struggles against the US dollar as well as the euro due to economic pressures and now talks of a Scottish independence referendum has taken its toll on the currency.