FTSE 100 unmoved by strong UK business confidence read

On Aug 31, 2021

The London headquarters various banks, including Citi, HSBC and Barclays, at Canary Wharf in east London. Many banks are moving assets from London to other EU cities in the face of uncertainty over Brexit. Picture date: Monday December 3, 2018. Photo credit should read: Matt Crossick/ EMPICS Entertainment. — Business confidence climbed six points to 36% in August, according to the Lloyds Bank Business Barometer. Photo: Matt Crossick/EMPICS Entertainment

European markets saw a subdued start on Tuesday morning in London following the long weekend, even as a new barometer of business confidence soared to its highest level since April 2017.

According to the Lloyds Bank Business Barometer, confidence climbed six points to 36% in August, while overall economic optimism also increased by 6%. This came after a slight dip in July.

The report showed that pay growth expectations also reached a three-year high, with more than a third of businesses predicting rises of at least 2% over the next 12 months.

The FTSE (^FTSE) opened almost flat, as did France’s CAC (^FCHI). Germany’s DAX (^GDAXI) rose 0.4%.

Over in the US, stock futures looked set to open higher, following a close at record highs for both the S&P 500 (^GSPC) and the Nasdaq (^IXIC).

S&P 500 (ES=F) and Dow (YM=F) futures were each 0.3% higher at the open in London, while the Nasdaq (NQ=F) looked set for gains of 0.4%.

Confidence is up in the US after the Federal Reserve said at the end of last week that interest rates would not be raised immediately after stimulus tapering and would only be changed once the economy is near full employment with inflation in check.

“Investors may take more exposure to the stock markets going forward, as we are still in the initial phase of the expansion cycle,” said Naeem Aslam, chief market analyst at AvaTrade.

“Furthermore, low interest rates along with robust earnings provide a strong case for a potential bullish market and higher stock prices in 2022. Having said that, investors should note that unexpected shocks could have an adverse impact on the financial markets.”

Overnight in Asia markets headed higher. The Nikkei (^N225) was 1.1% higher by the close, the Hang Seng (^HSI) moved up 0.7% and the SSE Composite rose 0.3%.

The gains in Chinese stocks were muted by a new report showing the Delta variant of COVID-19 had put a lag on economic recovery.

“It is likely that the ongoing government clampdowns in multiple sectors, notably student tuition and technology, are impacting both employment concerns in those affected and broader consumer confidence as fears of wider interventions rise,” said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA.

“The latter is a fair point, with China announcing more limits on online game time for children and investigating brokerage margin policies.”

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