Weekly round up
After falling at last week’s close, UK markets managed to regain some of their ground this week with the FTSE 100 Index rising 0.37% since Monday to trade at 7,474 points at the time of writing.
There was a weakness in banking shares on Friday as investors await the Bank of England’s monetary policy meeting, which is due next week, as well as the report into Downing Street parties during the pandemic due to be released on Monday.
UK retail sales rose in January beating market expectations but remained below seasonal norms as the country was operating under tightened Covid restrictions amid the spread of the Omicron variant. However, retail sales grew at a faster pace compared with the same month in 2021 as non-essential retail stores were closed across the UK in January last year.
Mixed corporate earnings are not helping to lift sentiment. Although most companies which have reported so far have beaten expectations, the outlook and guidance statements have been less inspiring.
In the commodity markets gold prices held their decline to around $1,790 on Friday, after falling around 3% in the past two sessions, as the dollar and treasury yields jumped following hawkish updates from the Federal Reserve meeting.
The US Central Bank indicated on Wednesday that it was likely to hike interest rates in March and begin reducing its balance sheet soon afterwards. Investors are pricing in as many as five rate increases this year but felt that the Federal Reserve fell short in providing much needed guidance on the timing and magnitude of the shift in policy. Since the update, the dollar has soared to highs not seen since July 2020 and the 10-year US Treasury yield has bounced back above 1.8%.
Brent crude futures held near $90 per barrel on Friday and are set for their sixth weekly gain as supply tightness and a policy of moderate output increases from major producers, kept oil prices elevated.
It was another volatile week in the US although US stock futures rose on Friday as Apple shares surged nearly 5% in after-hours trading. The surge followed Apple’s reporting of its largest quarterly revenue ever despite pandemic induced supply disruptions. Dow Jones Industrial Average futures edged up 0.5%, while the S&P 500 Index and Nasdaq 100 Index futures gained 0.6% and 1% respectively.
Prospects of higher rates continued to pressure technology and other growth stocks, which led the major US indexes to experience outsized intraday swings each day this week. The S&P 500 and the Nasdaq are now both in correction territory, sitting 10.2% and 17.6% below their respective record highs.
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