Our head of markets reveals the stocks behind the strong start to 2021.
The FTSE is again building on its positive momentum for the new year, unlike some of its global peers.
Despite sterling continuing its recent strength – a limiting factor on the FTSE 100 with its constituents’ large exposure to overseas earnings – and the announcement of a new national lockdown, the UK’s premier index has had a decent start to the year.
The index has been one to avoid for international investors over recent times, and there are some initial signs that the tide could be turning, as investors re-examine areas which have potentially been oversold amid strong performances for other global indices.
The oil price also rose to a recent high following the surprise announcement of a cut to production of one million barrels per day in February and March by Saudi Arabia. At the current price of around $54 per barrel, Brent crude is still some way off its opening price in 2020 of $67, although significantly higher than the April nadir when it was trading at around $20.
In contrast, US markets have yet to find their feet in the first couple of days’ trading, although an improvement in manufacturing activity saw the main indices edging higher yesterday. A close call in the Senate run-off in Georgia is also capping gains as investors mull over the implications of a possible “Blue Sweep”, initially feared to be market unfriendly, with the possibility of tax rises and tighter corporate regulation.
Even so, with further monetary and fiscal support standing ready in the background, the potential for a boost to recovery in the world’s largest economy is supportive.
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