Mining Stocks Track Rise in Commodity Prices
Tuesday was a good day for the market with financials and commodity stocks producing a 0.4% rise in the FTSE 100 index. The FTSE 250 was also up 0.2%. Markets are starting to show confidence in the government’s ability to deal with the coronavirus and these advances certainly reflect that. It remains to be seen how quickly the government can get the economy back on track. But judging by the market’s confidence, government measures seem to be working.
The FTSE 100 index is dominated by commodity shares. Rio Tinto, BP, Royal Dutch Shell, and Anglo American all gained nicely during the course of the day. Petra Diamond was up by 8.1% after its half-year core earnings received a 20% boost. The financial sector also got a boost thanks to the improving COVID-19 situation, with HSBC Holdings gaining 2.8% followed by Prudential Plc at 1.5%. Among other stocks, Glencore received a boost thanks to its dividend reinstatement, while Mitchells & Butlers increased by 7.9% on news of an open offering of shares. The firm plans to raise 350 million pounds on the new offering. Rolls-Royce got a new CFO, Panos Kakoullis, who was formerly the head of audit and assurance practice at Deloitte.
Serco also showed impressive gains at 7.4% after announcing it would buy Whitney, Bradley and Brown for 295 million dollars. The move comes amid efforts to bolster their defense business in North America.
Vaccinations and easing lockdowns
The UK has been the envy of everyone with how quickly it has been able to roll out vaccinations. Russ Mould, an investment director working at AJ Bell was quite happy with the way the government has managed the vaccination process. He attributed the market’s bullishness to the government's success in dealing with the pandemic.
The most important factor now is how long it takes for businesses to start operating normally again. Mould believes it’s a matter of when rather than how things will unfold. The pace at which the economy is reopened will remain debatable in the near term. SpreadEx’s analyst Conor Campbell said markets are cautious and defending their gains. Market performance will come down to how well the government manages to ease lockdown restrictions and get people back to their jobs. If the government can do that, markets should move higher in the coming weeks.
After the pandemic-induced crash in March 2020, the FTSE 100 has jumped back nearly 34% thanks to timely stimulus measures introduced by the Johnson administration. The FTSE 250 index also reached an 11-month high. Prime Minister Boris Johnson is confident he can slowly but surely pull Britain out of the pandemic.