Home Business News UK stocks rally as the economy opens up

UK stocks rally as the economy opens up

by LLB Editor
22nd Jun 21 1:40 pm

Sterling rallied on Wednesday after a pick-up in UK CPI inflation, which jumped to 2.1% in May from 1.5% in April and which was driven by the cost of fuel and clothing. The British currency advanced 0.3% against both the US dollar to $1.4119 and the euro at €1.1638.

“The currency gains helped to drive the domestic-facing FTSE 250 0.5% higher, with housebuilders Bellway and Vistry, building materials group Travis Perkins and property group Unite were among the top risers. The economy is picking up thanks to strong consumer spending and anything related to the buoyant property market has also been fired up,” says Russ Mould, investment director at AJ Bell.

“The FTSE 100 moved forward despite a stronger pound being a headwind for its multitude of overseas earners. A 0.3% rise to 7,196 was driven by NatWest as banks should benefit from a stronger UK economy thanks to increased appetite from consumers and businesses to borrow money, as well as gains from B&Q owner Kingfisher which is riding the DIY boom.

“It’s worth remembering that the FTSE 100’s constituents are more representative of the global economy rather than simply the UK. Names like Diageo and Unilever were in demand from investors as they should benefit from greater consumer spending around the world, and increased economic activity bodes well for oil consumption which is pushing up shares in Royal Dutch Shell.

“With Covid increasingly being put in the rear-view mirror and life getting back to normal, we’re getting more lockdown winners seeing their purple patch fade away. The latest casualty is car competition provider Best of the Best whose shares crashed 20% after it revealed that customers have become less engaged since lockdown restrictions started to ease. It thrived when we were all stuck at home, but everyone is bored of that now and desperate to enjoy the great outdoors.”

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