Markets hit new highs as political optimism grows

Wall Street, S&P, Nasdaq and FTSE 100 all buoyed by hopes of trade deal and political stability

Markets in the UK and US touched new highs in trading today, as the UK general election result and optimism over the US-China trade deal continued to cheer investors.

In the morning the S&P was up 0.82 per cent at 3194.92 while the Nasdaq reached 8828.36, a rise of 1.07 per cent.

Traders were feeling a wave of positive sentiment amid signs that US interest rates were unlikely to rise in the short term, and that the US-China trade deal was in hand, though not yet officially ratified.

The dollar fell against major currencies due to a general feeling that interest rates were unlikely to pick up anytime soon.

Against the pound it was 0.745, a fall of 0.07 per cent; against the euro it was 0.8974, a reduction of 0.17 per cent. Against the yen it was 109.38, a fall of 0.14 per cent.

In the UK, the FTSE 100 continued the climb it had enjoyed on Friday, posting a rise of 2.25 when it closed at 7519.05.

Overall, this means that UK stocks are collectively worth an estimated £70bn more than they were on Wednesday evening last week, on the eve of the UK general election.

All sectors were up, with many enjoying a revival after Labour’s defeat in the polls.

Those potentially subject to greater regulatory scrutiny under a Jeremy Corbyn government were among those most benefiting from the post-election bounce. These included healthcare companies, telecoms providers, banks and technology companies.

The FTSE 250 index also touched new highs in early trading, rising 412.90 points, or 1.92 per cent, to end the day at 21,920.69.

There was good news in the housing market, with the UK’s biggest property website, Rightmove, predicting a 2 per cent rise in property prices in 2020.

It said the housing market was poised for a spring revival and that the normal dip in December prices had been less than would normally be expected for this time of year.

Such was the optimism that some analysts even suggested the FTSE 100 index could reach 8,000 by this time next year, which would require a rise of around 500 points over the next 12 months.

The markets shrugged off gloomy news from the UK composite PMI business survey for December, which suggested GDP would shrink by 0.2 per cent in Q4 of 2019.

The Flash UK Composite Output PMI fell to a near three-and-a-half-year low in December. Manufacturing output fell at a rate exceeded only once since the global financial crisis, according to IHS Markit PMI figures.

Separately, the Office for Budget Responsibility said government borrowing would be £20bn higher than had originally been forecast over the next five years, but even this failed to dent the markets.

Indeed, some analysts suggested that the UK markets’ ebullience was misplaced, given that it was still subject to the same economic pressures that were causing a general global slowdown. They said it was unclear how Prime Minister Boris Johnson was going to achieve a quick resolution to the Brexit standoff.

Bitcoin was down slightly, peaking at 7,129.49 while gold was flat.

Oil futures were mostly in the green after reaching a three-month high on Friday, December 13. Crude oil was up 0.35 per cent to 60.28 in early evening trading.

On the exchanges, the pound was mainly unchanged against the euro, at 1.1968, while against the dollar it was up around 0.1 per cent at 1.3338.

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