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FTSE 100 set to stage partial recovery as Bitcoin bounces back

·2-min read
 (Getty via AFP)
(Getty via AFP)

The FTSE 100 was today set to claw back most of the losses made in yesterday’s sharp fall.

In a rough session that at one point saw it tumble nearly 2%, the London market ended down 84 points on Wednesday.

Today it was set to rally 63 points on the opening to move back to the 7000 mark.

Inflation worries had been a key factor behind yesterday’s tumble but, as with so many of the recent down-days on the markets, no sooner have the sellers done their worse than bargain hunters move in and a recovery takes place.

US tech shares staged something of a rebound after European markets closed, which should help boost confidence in today’s session.

Asian shares were mixed this morning, with the Hang Seng in Hong Kong down 0.7% and the Nikkei up 0.26%.

One reason to hope for a better day was that the big sell-off in Bitcoin and other crypto currencies yesterday appeared to be taking a breather. Bitcoin was up nearly 1% at $39,326 this morning.

While it’s impossible to know why cryptos do what they do, some analysts were putting yesterday’s slide down to warnings from China that regulators may get more interventionist. Authorities in the giant trading nation appear to be looking to become more activist both in crypto and commodities, which also fell sharply yesterday, CMC Markets noted.

Minutes from the US Federal Reserve’s last meeting on monetary policy showed several members were leaning towards taking action to stop inflation running away. Investors are now moving towards predictions that it will begin tapering off the current levels of quantitative easing bond buying in the Autumn.

With UK and European companies still in the thick of reporting their quarterly profit figures, it could be deemed premature to begin analysing how companies have fared, but US corporations, which are close to completing their reporting season, suggest the rebound from Covid has been huge - just as the Dow Jones and Nikkei indices predicted.

US profits growth year-on-year has been more than 50%, with 87% beating analysts’ forecasts, Refinitiv said. That was the biggest outperformance since the data company started tracking it.

So far, Europe’s biggest companies have seen annual profits grow 93%, bouncing back more sharply because of Covid’s greater impact this time last year.

The vaccination rollout has had a massive impact on profits, driving corporate recoveries far faster than most analysts had expected, while companies’ ability to adapt to lockdowns with new technologies and ways of working had also blindsided analysts paid to predict profit.

Analysts may have been too cautious, but fund managers appear to have got it broadly right, as share prices have generally not reacted to the forecast-busting profit figures. That suggests the recovery was already correctly priced in in advance, the FT reported.

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