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Global recovery optimism sends FTSE 100 over 7,000

FTSE100 moves above 7,000

The FTSE 100 has ended the week by pushing through the 7,000 level for the first time since February 2020, as more evidence of a strong global recovery has helped boost sentiment heading into the weekend.

A big rebound in China Q1 GDP numbers released this morning, as well as a strong retail sales number, has served to add fuel to the fire of optimism that has coursed through global markets this week, in the wake of yesterday's bumper US retail sales number.

We’ve seen gains in the automotive sector helped by a decent rebound in European car sales in March, but also a strong update from Daimler, which sent the shares to their highest levels in over a year, after reporting a big jump in quarterly earnings helped by a big rebound in China sales. This was driven by strong demand for Mercedes cars, helping to push global sales up by 22% to 581,270, with China sales rising 60%.

Some more positive numbers for US banks have helped give financials a bit of a leg up, with Barclays leading the banks higher. High-street retailers Next and JD Sports are also having a good day, having released positive trading updates in the last week or so. Ocado shares are also higher after announcing it was investing £10m into Oxbotica, a company that specialises in software for driverless vehicles, which would be used in and around its warehouses and distribution sites. The London Stock Exchange is the biggest faller on the FTSE 100, amid reports of a shareholder revolt against a 25% pay rise for CEO David Schwimmer.

L'Oreal shares have fallen back from their record highs this week, despite seeing a big increase in Q1 sales, largely as a result of a decent rebound in Chinese demand. Their European operations have continued to act as a drag, with revenue there sliding 2.4%, and today’s share price reaction appears to be a consequence of profit-taking after gains of over 10% from the January lows. They obviously aren’t worth it today.

US

US markets picked up where they left off yesterday, with the S&P 500 opening at another new record high, as it looks to post its fourth successive week of gains. US housing starts surged in March by 19.4%, more than reversing the -11.3% cold weather-inspired decline seen in February.    

Morgan Stanley became the latest US bank to beat expectations on its Q1 numbers, with profits coming in at $2.22 a share, on net revenues of $15.7bn, with the equities and FICC divisions both posting better-than-expected top line numbers. These revenue beats also need to be put in the context of the acquisition of E*Trade, which will have boosted the numbers, compared to a year ago. On a more notable point, the bank posted a loss of $911m in respect of its exposure to Archegos Capital, and this appears to be prompting some underperformance.

The Coinbase share price has gained on reports that fund manager Cathie Wood’s ARK Innovation ETF scooped up some more shares yesterday, though there is a sense they might be susceptible to further weakness if today’s declines in bitcoin and ethereum start to mark a minor short-term top.

FX

The US dollar has continued to sink, while US 10-year yields have stabilised after yesterday’s sharp decline. There appears to be a bit of a tug of war going on with respect to market inflation prospects, with some working on the premise that this part of recovery is already in the price, or that markets think this could be as good as it gets, and the data could deteriorate from here on in. The latter doesn’t seem likely, given that we could see a similarly strong April non-farm payrolls report in two weeks’ time.

The pound appears to have stabilised after its losses last week, hitting one-week highs against the US dollar, and ahead of a slew of economic data next week. Meanwhile the euro is back tapping on the door of the 1.2000 level against the US dolla, which won’t be welcome news for the ECB, who meet next week for their regular policy meeting.

Commodity currencies have performed very well this week, with the Australian dollar and Norwegian Krone outperforming as a result of resilient metals and oil prices.     

Commodities

Gold prices have continued to move higher, breaking above the 50-day MA yesterday and pushing up to its highest levels since February, as US yields continue to succumb to further declines.

Bitcoin appears to have hit a short-term peak after hitting a new record high this week, while ethereum in particular is down sharply, despite hitting a new record high earlier today. The move higher in this cryptocurrency looks especially overstretched, given it has risen over 200% so far year to date.

Crude oil prices look set for a strong weekly gain of 6%, helped by this week’s bumper economic data out of the US, as well as rising optimism over a strong spring recovery, as lockdown restrictions continue to get eased. Doubts about rising virus cases in some parts of the global economy slowing this process appear to be being put to one side for now.   


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