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FTSE 100 Live 25 January: London stocks point higher after Wall Street rebound, borrowing


FTSE 100 steadies, Baillie Gifford fund remains upbeat

The FTSE 100 index is 0.4% higher, up 27.5 points to 7324.65.

Royal Mail shares have risen 2.5% and stocks at the forefront of yesterday’s sell-off have recouped some of their losses, with betting firm Flutter Entertainment among those 2% stronger.

The FTSE 250 index has improved 0.7% or 154.96 points to 21,607.46, led by leisure chain Cineworld after a 5% recovery.

Baillie Gifford US Growth Trust also rebounded 2% on the day it published results for the six months to the end of November.

The £1.1 billion fund said in its outlook statement: “The path for companies driving structural change may not be straight; some paths will weave and wend and turn out to be dead ends. Other paths will branch new opportunities and take us in directions we might not be able to imagine currently.

“But our rucksack is laden with optimism, patience and excitement. In a world of asymmetric returns, we believe it is better to venture, than not venture at all.”


Inflation adds to pressure on public finances

Government borrowing is pointing in the right direction after December’s figure fell to £16.8 billion from £24.4 billion the year before.

But with the debt to GDP ratio sitting at 96%, the highest level since the 1960s, the Chancellor remains in a tight spot after the pandemic ravaged the public finances.

High levels of employment have boosted tax revenues, but this is being offset by rising interest payments from the cost of government bonds tied to the retail prices index (RPI).

Laith Khalaf, head of investment analysis at AJ Bell, said: “With price rises still coming down the track, inflation is going to continue to bump up the coupons paid by the government to holders of RPI linked bonds, so this won’t be a flash in the pan.

“To add considerable fuel to the fire, interest rates are rising, which means the government will have to pay more interest on the £875 billion of gilts held with the Bank of England.

“And if that were not enough, gilt yields have shot up, to over 1% on the 10 year bond, which means the government will also be paying more for freshly issued debt than before the pandemic.”


FTSE 100 steadies after Monday’s 2.6% slide

The FTSE 100 index yesterday endured its biggest one-day fall since the discovery of the Omicron variant in November, sliding 2.6% or almost 200 points to 7297. High growth tech stocks took a hammering, with cyber security firm Darktrace down 15% in the FTSE 250.

The Nasdaq 100 lost almost 5% at one point on Monday but a turnaround just before the closing bell meant the tech-laden index eventually finished 0.6% higher.

Futures markets are pointing to a fresh fall of 1% when Wall Street reopens, although last night’s rebound should at least mean the FTSE 100 opens higher. CMC Markets is predicting a rise of 60 points to 7357.

Rising tensions on the Ukraine border accelerated the flight from risk yesterday, while investors were also focused on the outcome of this week’s US Federal Reserve meeting. Inflationary pressures mean the Fed is tomorrow likely to signal the start of interest rate rises from March, with the focus on accompanying comments from chairman Jerome Powell.

CMC’s Michael Hewson said: “Up until Friday markets in Europe had largely shrugged off the underperformance that had characterised US markets so far this year, with concerns over weak company guidance and the Federal Reserve’s likely rate rise path only part of the wider story.

“Yesterday’s declines in European markets had more to do with events on the Ukraine/Russia border than with any other factors that have dominated sentiment over the past two weeks.”

Read More: FTSE 100 Live 25 January: London stocks point higher after Wall Street rebound, borrowing

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