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MARKET WRAP: FTSE surges after lower open, USD strong, Oil lower

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Key Points

FTSE 100 closing price of 7,556.7 (+1.2%)
FTSE has 200 point swing from low point
Financials lead upturn on expectations of higher rates
Diageo strong after results
USD strong after Fed
Crude slips after hitting multi-year highs
Cryptos lower with focus on Fed

By Samuel Indyk

Investing.com – The FTSE 100 opened lower but bounced 200 points from its low print at one stage before edging back to close higher by 1.2%% at 7,556.7.

Banks led the rebound in the blue-chip index with the prospect of higher rates in the UK and US supporting share prices. Standard Chartered (LON:STAN) and HSBC (LON:HSBA) led the gains in the financial sector with higher rates set to help profitability.

Diageo (LON:DGE) shares were also higher after the alcoholic drinks maker said net sales were up 15.8% in the first half of the year, with operating profit increasing 22.5%. The company was also upbeat on its outlook for the second half of the year, despite tough comparatives.

“Diageo is very much regarded as a consumer staple and a building block of most portfolios, and the market consensus of the shares as a buy is indicative of ongoing investor support for prospects,” said interactive investor Head of Markets Richard Hunter.

However, Hunter cautioned that the company will have to navigate some challenges if the shares are to continue to perform well.

“There will continue to be hurdles to negotiate, both within and outside of the company’s control,” Hunter addied. “The effects of the latest variant are still being felt to differing degrees, supply chain blockages have yet to ease and inflation has yet to be contained from a global perspective. Added to the impending round of tougher comparatives in the second half, the company will need to maintain the momentum provided by the first.”

The USD strengthened in the wake of the Fed’s decision on Wednesday with the US Dollar Index hitting its highest level of the year. Although he didn’t commit to hiking interest rates at every meeting, Fed Chair Powell didn’t rule it out either, which some have viewed as a hawkish pivot.

GBP/USD slipped below 1.3400 to its lowest level since 23rd December as the USD strengthened with greenback stronger than all its major counterparts.

WTI and Brent crude futures both hit multi-year highs on Thursday, the latter’s March contract briefly trading above $91/barrel, however, most of the volume is in April which didn’t quite break $90. The geopolitical tensions in Russia and Ukraine are continuing to support prices while the supply picture remains tight ahead of the next OPEC+ meeting which is scheduled to take place on 2nd February. The group is likely to reconfirm its production plan that will see overall production increase by 400,000 bpd for the month of March.

Bitcoin and other major cryptocurrencies were slightly lower despite a rebound in stocks, particularly the tech-heavy Nasdaq 100. However, Bitcoin is well off the low print hit earlier in the week and there’s hope in the community that the heavy selling may be over for now.

“The cryptocurrency was getting into dangerous territory but has recovered well as sentiment has improved and now looks in a much more comfortable position,” writes OANDA Senior Market Analyst Craig Erlam. “Of course, volatility is still here and there’s plenty of underlying anxiety in the market that could see Bitcoin tumble again but suddenly, $40,000 is looking more vulnerable than $30,000.”

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MARKET WRAP: FTSE surges after lower open, USD strong, Oil lower

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