European Factors to Watch-Shares seen lower at open

23 Dec 2015 | Author: | No comments yet »

FTSE jumps as investors cheer the Fed rate riseTOP SHARE index, the FTSE 100, climbed yesterday, tracking gains on other equity markets after investors took the first US interest rate rise in nearly a decade as a sign of policymakers’ confidence in the world’s biggest economy.“With the Dow rising steadily from the moment [Fed chairwoman Janet Yellen] first opened her mouth, the rosy picture she painted of the US economy and the absence of major overseas threats has sent markets surging with relief,” said Robert Craig, private client investment manager at MB Capital. Healthcare stocks including AstraZeneca and Shire rose after AstraZeneca’s decision to buy 55 per cent of Acerta Pharma highlighted the extent of takeover activity within the industry, which has boosted health stocks this year.

South Africa-exposed stocks continued to rally, with Old Mutual, Investec and Mondi all up between five and 12 per cent so far this week after the appointment of a new finance minister lifted the South African rand from a record low. The US rate hike pushed down the price of gold and other metals; a stronger dollar makes commodities that are priced in the currency more expensive for buyers using other currencies. But sterling recovered ground lost against the dollar and was 0.3% higher against the euro to €1.3783 after positive retail sales numbers for November. While the spectre of higher rates is often bad for existing debt prices, analysts said investors were pleased future Fed rate rises would be “gradual” in nature. “Overall, there were no nasty surprises in there – the Fed sounded quite dovish, data-dependent, so I think fixed income markets were quite happy with it,” Jason Simpson, fixed income strategist at Societe Generale. Away from the blue-chips, and FTSE 250 fast food firm, Domino’s Pizza rose 5.6 per cent, after Berenberg upgraded it to a “buy” rating from “hold”.

The decision in the US to raise rates has led investors to ask when the Bank of England will follow suit and push rates up from their current record low of 0.5 per cent.

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