On Tuesday, London’s benchmark UK FTSE 100 index gained, as a strong performance in consumer staples and banks and a buoyant global mood managed to offset worries of a big interest rate hike in the next month after the jobs data turned out to be stronger-than-expected.
The resource-heavy FTSE 100 had recorded losses early in the recession, which it managed to reverse, as it climbed up by 1.0%. Meanwhile, a 1.4% gain was recorded in the mid-cap domestically focused FTSE 250 index.
Market analysts said that the optimism in the global market and the scaling back of recession worries had proven to be the main trigger for the gains. However, they did add that the positive trend was likely a bounce in the bear market and nothing more.
According to the latest data, in the three months to May, the unemployment rate in Britain continued to hold steady at 3.8% and there was an increase in the number of people going to work since the middle of last year. This suggested that demand for workers has not been impacted by the cost-of-living crisis Britain is facing right now.
Interest rate hike
A 90.4% possibility of an interest rate hike by 50 basis points has been priced in by traders in the next month’s meeting of the Bank of England. It is expected that the retail sales and consumer prices data that is due later in the week would offer some fresh clues about the health of British consumers and the inflation condition.
The blue chip FTSE 100 index had gotten a boost from banks, which had recorded 1.7% gains, while defensive stocks, such as consumer staples also gave their support. These included British American Tobacco, which rose by 1.3%, and Unilever which climbed by 2.0%.
Market analysts said that with interest rates expected to rise in the next month, it is expected that the interest revenue of banks would also see an improvement, as long as there is no recession. They added that banking stocks were behaving in a cyclical manner.
There was a 14.9% rise in Wise, the money transfer company after its revenue growth turned out to be quite strong. There was also a 4.8% rise in Darktrace Plc, as the cybersecurity company increased its margin forecast for the full year because of steady growth in consumers.
Made.com recorded the biggest decline of 46.0% in the small-cap index, which brought it to a record low. This was because the company reduced its earnings and sales guidance for the year and added that it was not expecting to see an increase in demand any time soon for any big-ticket items.
Meanwhile, the race for choosing the next British Prime Minister is still ongoing, with the former finance minister, Rishi Sunak holding onto his lead amongst the lawmakers of the Conservative party. However, his two main competitors were catching up fast, which left the race open. The choice of the premier is also expected to have an impact on the market.