FTSE rallies as bond fears recede and optimism rises
CALMER bond markets and a dose of economic optimism worked wonders today as investors toasted a rapid turnaround in fortunes for global markets.
Friday’s frenzied inflation-driven selloff was put to one side after the FTSE 100 index rallied 1.7% higher, driven by resurgent housebuilding, mining and technology stocks.
The rise came as the yield on 10-year US Treasury bonds eased to 1.4%, helped by reassuring comments from central bankers after last week’s surge to a oneyear high. London’s quick-fire start to the month was given momentum by hopes the Budget will include better-than-expected forecasts on the UK economic recovery, raising the prospect of fewer tax rises than first feared.
The projections by the Office for Budget Responsibility are reportedly set to show the fastest growth rate in almost 50 years, with output back to the 2019 peak early next year.
Hopes for a stronger-than-expected summer of activity received a further boost by robust PMI figures in the UK manufacturing sector.
The FTSE 100 index surged 111.10 points to 6,594.3, with British Airways owner IAG among significant risers after improving 10.35p to 202.3p. Tesla investor Scottish Mortgage Investment Trust also recouped some of last week’s sharp losses to climb 53p to 1,188p.
Shares in distribution group Bunzl were higher after the blue-chip reported its 28th year in a row of dividends growth with a full-year payment 7% higher at 38.3p a share.
Annual profits jumped 22.6% to £555.7 million on revenues of just over £10 billion as the company benefited from one-off demand for PPE deliveries of gloves, masks and sanitisers. This demand helped to offset the impact of restrictions elsewhere, particularly affecting its businesses supplying workplace items to foodservice and retail.
Shares were initially 3% lower on uncertainty over how the unwinding of Covid-19 contracts will hit Bunzl’s topline, but they later rallied to stand 24p higher at 2,261p.
The economic recovery hopes were best seen in the domestic-focused FTSE 250 index, which jumped almost 2% or 392.15 points to 21,300.23. Airport caterer SSP rose 18.4p to 362.8p, while pubs chain JD Wetherspoon added 55p to 1,291p for a gain of 4%.