Yahoo Finance FTSE finishes strong as Wall Street struggles amid debt limit jitters
A look at how the major markets are performing on Friday
The FTSE 100 and European stocks finished higher this Friday, extending rallies on Wall Street fuelled by optimism over talks to avert a catastrophic US debt default.
The FTSE 100 (^FTSE) gained 0.46% to close at 7,777 points, while the CAC 40 (^FCHI) in Paris gained 0.89% to 7,512 points. In Germany, blue-chip DAX (^GDAXI) index climbed 0.89% to set a new record high of 16,307 points.
The FTSE 100 rose as data showed British consumer confidence hit a 15-month high, adding to the optimism that a deal over the US debt ceiling was imminent.
Wall Street's main indices were lower as traders wait for a deal to avoid a catastrophic US debt default.
FTSE
London stocks edged higher following a positive close on Wall Street, amid hopes a deal will be reached to avert a US debt default and improved consumer confidence.
Richard Hunter, head of markets at Interactive Investor, said: "Growing optimism for a resolution to the debt ceiling negotiations lifted sentiment, although the mood was slightly tempered by question marks over the Federal Reserve’s next move on interest rates.
"The mood music from the politicians involved in brokering a deal to raise the debt ceiling and avoid an unthinkable US default was more positive, with investors reacting with cautious optimism until such time as a deal is finalised."
Miners led the gains across the UK's blue chip index, with Anglo American (AAL.L), Rio Tinto (RIO.L), Glencore (GLEN.L) and Antofagasta (ANTO.L) all up.
Smiths Group (SMIN.L) rallied as it lifted revenue guidance after a strong third quarter, driven by volume and price growth. Organic revenue was up 13.4% for the nine months to 30 April, leading Smiths to increase 2023 guidance to around 10% organic revenue growth with "moderate" margin improvement.
Read more: Food prices to overtake energy as biggest cost of living headache in the UK
BT Group (BT-A.L) rose 3.23% after Thursday’s results-day hammering, while Burberry (BRBY.L) slipped 3.77%.
Also driving sentiments across the markets was data suggesting that consumer confidence in the year ahead is continuing to recover despite persistent cost of living pressures.
GfK’s Consumer Confidence Index rose by three points in May to minus 27, the fourth monthly increase in a row from January’s minus 45.
Confidence in personal finances over the coming 12 months saw a “robust” five-point jump to minus 8 — 17 points higher than this time last year.
US and Asia
US stocks were struggling on Friday as investors eye updates in the ongoing debt ceiling debate and digest a better-than-feared first-quarter earnings season.
The Dow Jones (^DJI) lost 0.19% to 33,472 points. The S&P 500 (^GSPC) slipped 0.15% to 4,191 points and the tech-heavy NASDAQ (^IXIC) tumbled 0.22% to 12,661.
"I see the path that we could come through,” House Speaker Kevin McCarthy told reporters on Thursday morning. He added: “It’d be important to try to have the agreement, especially in principle, by sometime this weekend.”
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In Asia, shares nudged lower, weighed down by China and Hong Kong stocks due to concerns over the stuttering recovery in the world's second-biggest economy, although Japan's Nikkei clocked a near 33-year peak.
Tokyo’s Nikkei 225 (^N225) gained 0.77% to 30,808 points, while the Hang Seng (^HSI) in Hong Kong lost 1.31% to 19,468. The Shanghai Composite (000001.SS) slipped 0.41% to 3,283 points.
So far this year, the Nikkei has gained around 19%, outpacing other major markets. But despite the recent rally, the Nikkei is still below its all-time peak over 36,000 set in 1989.
Hopes of a debt ceiling deal have fuelled big rallies on equities. All time highs on DAX, 33 year highs on the Nikkei.
All amid higher yields and a stronger USD on major forex. Overbought conditions suggest something has to give.
Markets looking a bit more settled overnight. pic.twitter.com/1ntj5XSGp1— Richard Perry (@RPMarketAnalyst) May 19, 2023
Japan’s core inflation nationwide rose 3.4% year-on-year in April, in line with forecasts by economists polled by Reuters.
Pound
The pound (GBPUSD=X) has not managed to pounce on US debt ceiling optimism as with many G10 currencies as investors remain in the cautious’ camp, with sterling trading at $1.2414.
Sterling (GBPEUR=X) was muted against the euro, trading at €1.1512.
UBS forecast further gains for the pound against the US dollar (USD) while it expects “more of the same” against the euro.
The Swiss bank said sterling has been the best performing G10 currency against the USD this year but feels there is more to come.
“In our view, more gains are likely over the next 12 months, supported by a still attractive valuation, and a central bank that has recently taken a more hawkish shift.”
Oil markets
Meanwhile, Brent crude (BZ=F) gained ground and was trading at around $76 per barrel with oil prices set to record their first weekly gain since mid-April as sentiment about future demand improves amid signs there may be progress on the debt ceiling negotiations in Congress.
“I think markets have been pricing out the risks of a US debt default, which translates to a more risk-on environment and some dip-buying in Brent crude from previous oversold conditions,” said Yeap Jun Rong, market strategist at IG.
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