After a brutal couple of sessions, the FTSE 100 has bounced back with investors flocking to a mixture of companies offering strong growth prospects such as Aveva as well as ones that have been beaten up and look cheap relative to history including ITV,” says Russ Mould, investment director at AJ Bell.
“Rolls-Royce jumped 5.5% to 218p after yesterday hitting a 16-year low following disappointing results last week and expectations for a deeply discounted share placing. Today’s rebound would suggest some investors believe the stock to have been oversold and that plans to strengthen its balance sheet will give it enough breathing space to get through the current crisis.
“It may also be that some investors have mistakenly associated the quoted Rolls-Royce (which makes engines for the aerospace sector) with Rolls-Royce Motors Cars which is owned by BMW. The latter says demand for luxury cars is recovering, which has provided positive read-across to other luxury goods sellers including Burberry whose shares rise 3.6%.
“Helping to drive the FTSE was strength in the dollar, rising 0.4% against sterling which will benefit the large number of companies on the index with foreign earnings. Positive news on the UK property market will have also improved investor sentiment, giving a lift to housebuilders.
“Elsewhere on the markets, European stocks joined the FTSE with a decent recovery including a 1.4% rise in the Dax. Asian markets were mixed.”
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