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FTSE becalmed after ‘GameStonk’ surge in the US

by LLB Editor
27th Jan 21 11:31 am

The FTSE 100 might be stuck in a funk but there are still plenty of signs of exuberance on the other side of the Atlantic,” says AJ Bell investment director Russ Mould.

“Video games seller GameStop or ‘GameStonk’, to use the vernacular from Tesla founder Elon Musk’s tweet, continues to surge with Musk’s remark on Twitter prompting further gains and taking the company’s valuation into the tens of billions of dollars.

“Amateur investors on social media platform Reddit are engaged in a battle with hedge funds which are shorting GameStop (and several other stocks including Blackberry and Virgin Galactic) raising fears about a bubble in the markets given these stocks are being backed on little tangible news.

“A hot US firm which is delivering some substance behind the hype is Microsoft, with a strong showing for its Azure cloud services division helping it to beat quarterly expectations.

“All eyes will be on Tesla and Facebook who are due to report after the market close in the US, in such a febrile atmosphere even the slightest disappointment could create shockwaves in the market.

“Back in the UK, the FTSE is being constrained by a strong showing for sterling against the dollar (weakening on expected stimulus efforts) and the euro (hit by a slow rollout of vaccines across the Eurozone).

“When the pound is strong it hits the relative value of the overseas earnings which dominate the index.

“The course of the Covid-19 pandemic is also not helping sentiment as investors try to judge whether restrictions might be tightened in the short term and when in the medium term they might start to be eased.”

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