Is the Santa Rally finally here? Markets certainly seem to have a spring in their step, with the major indices across Europe, Asia and the US all pushing forward.
The US Federal Reserve’s monetary policy update last night has gone down well with the markets.
The prospect of three US interest rate hikes in 2022 would suggest the central bank has a clear plan to not let inflation get out of control. Equally, it isn’t being too aggressive to trip up the economy. This sense of balance is exactly what investors want, and an upbeat tone from the Fed certainly seems to have rubbed off on markets.
Russ Mould, investment director at AJ Bell, said: “The S&P 500 closed 1.6% higher last night, and Japan’s Nikkei followed suit with a 2% advance on Thursday. In mainland Europe, markets enjoyed gains of between 1.2% and 1.7%, while in the UK the FTSE 100 advanced 1.1%.
“The UK market reaction might surprise some people given Prime Minister Boris Johnson’s televised briefing last night which gave a bleak view of events as Omicron spreads fast across the country, threatening to put pressure on the health system again.
“The seriousness of the briefing gave flashbacks to the early stages of the pandemic when we all sat around watching daily updates from the Prime Minister on how the world was at danger. One might have thought that was enough to put investors in risk-off mode, but that hasn’t happened.
“In addition to a strong day for equities, sterling bounced back after recent weakness, rising 0.3% to $1.3297. Brent Crude oil prices nudged 1.1% higher to $74.66, and even some of the seemingly vulnerable sectors like airlines and pub companies moved higher despite the risks to their business from Omicron. International Consolidated Airlines moved up 1%, while Marston’s traded 1.8% higher.”