FTSE rises on more dovish sounds out of US Fed

After a cold start to the week, the FTSE 100 came back with another strong performance on Tuesday, shaking off the fears from a week ago over the military situation in eastern Europe.

Markets across Europe outperformed their Wall Street counterparts as they soared upwards. Traders once again seem more focused on US monetary policy than on a potential war between Russia and Ukraine.

By the end of the day, the FTSE had added 1% to its value, rising 71.41 points to 7,535.78.

Its European cousins were also performing well. Germany’s Dax also gained 1%, while the Cac 40 in Paris was up 1.4%.

“European markets have got off to a strong start to February, after last night’s push back by a number of Federal Reserve officials, who poured cold water on some of the hawkish narratives being put out with respect to the Federal Reserve’s hiking timeline,” said CMC Markets analyst Michael Hewson.

Three insiders have convinced markets that the Fed – the world’s most powerful central bank – will probably only move interest rates up by 0.25 percentage points in March, compared to the 0.5 that some had been expecting earlier.

London’s biggest banks, including HSBC and Lloyds, were performing well. The natural resources sector was also a strong winner on the FTSE 100, with Fresnillo, Glencore, Shell and Anglo American all close to the top of the day’s winners.

“Supermarkets have been a mixed bag after the latest Kantar grocery sales data for the 12 weeks to January 23 showed a fall of 3.8%, on a like for like basis,” Mr Hewson said.

“Rising prices also played a part in the decline, with prices rising sharply in the period after Christmas, by as much as 3.8%, a rise of 0.3% from December.

“In terms of market share only Tesco and Waitrose improved their market share over the 12-week period, despite weaker sales compared to a year ago, helping to push Tesco shares up on the day.”

When markets in Europe had closed, New York was less positive, the S&P 500 and Dow Jones were both trading up 0.1%.

Sterling dropped just 0.01% against the dollar, while it gained 0.05% against the euro. By the end of the day one pound could buy 1.3504 dollars or 1.2014 euros.

Shares in Ocado dropped to the bottom of the FTSE 100, despite being one of only three supermarkets – Aldi and Lidl were the others – to show a rise in sales in the last 12 weeks compared to a year earlier.

Shares in Vodafone and BT dropped. Both are reporting earnings later this week.

In company news, Tesco announced that 1,400 workers could be at risk of losing their jobs as it plans changes to the night shifts at supermarkets and petrol stations.

A day after confirming it would close Jack’s – its recently launched discount chain – putting 200 jobs at risk, it announced further potential cuts. Most redundancies will come from changing the way overnight staffing is structured, Tesco said.

Shares rose 1% on Tuesday.

In other news, AG Barr said that it expects sales for the 12 months to the end of January to have risen by nearly 18% to £267 million, rising above pre-pandemic levels.

But the company also said that prices of its products, which include Irn-Bru and Rubicon, have gone up due to inflationary pressures.

The company said it has “adjusted our pricing with customers where appropriate,” as the cost of raw materials, energy and packaging rise.

Shares rose 1%.

The biggest risers on the FTSE 100 were Fresnillo, up 24.8p to 649.6p, Scottish Mortgage Investment Trust, up 38.5p to 117.5p, Glencore, up 12.9p to 395.9p, Shell, up 60p to 1,946.6p, and Anglo American, up 102.5p to 336.6p.

The biggest fallers on the FTSE 100 were Ocado, down 73p to 1,431p, United Utilities, down 93p to 3,051p, Vodafone, down 2p to 127.96p, Imperial Brands, down 27p to 1,724.5p, and BT, down 3p to 192.6p.