Shares bounce back but FTSE still in deficit

A strong performance yesterday still left London’s top-tier short of where it started the week despite optimism driven by the City’s natural resource giants.

After gaining 104.44 points, or 1.4%, the FTSE 100 still only finished at 7,347.66, a good 40 points short of its close on Friday.

“Beleaguered stock markets have recovered to an extent this afternoon, following a slowing of US CPI (consumer prices index) growth, but concerns about further tightening remain,” said Chris Beauchamp, chief market analyst at online trading platform IG.

He said that the US Federal Reserve, led by Jerome Powell, will probably keep on hiking interest rates in a bid to dampen inflation.

“Jerome Powell has certainly been doing his best to fight inflation through higher rates, but comments from President Biden in the wake of inflation data shows that the administration expects the Fed to keep going in its quest to cool price growth,” he said.

“Some post-CPI dollar weakness is likely to give way to more upside for the greenback, at least until a global recession becomes a more distinct possibility.”

CMC Markets analyst Michael Hewson said that this was feeding through to London.

“The weaker US dollar is giving commodity prices a lift, helping to underpin the basic resources and energy sectors, pushing the likes of Glencore, Rio Tinto, Shell, and BP to the top of the FTSE 100,” he said.

The top mover on the FTSE was Compass Group, which rose 7.4% after beating expectations in the first half, upgrading its outlook for the full year, and announcing a halfbillion-pound share buyback.