Daily Wrap Up 20 June 2022

20 Jun 2022 04:37 PM

FTSE outperforms as banks rally

Volatility is low in the markets as the US marks Juneteenth. The New York Stock Exchange remains closed, and in turn that has prompted traders in other parts of the world to wait on the side-lines. Although US shares are not changing hands today, US index futures are trading, and they are showing a modest rebound from the brutal losses that were seen recently. Last week, the Dow Jones and the S&P 500 fell to their lowest levels since late 2020. Fears the US economy might be edging towards a recession have ticked up because of the mild warning from Jerome Powell at the recent Fed meeting. European equity markets are higher as we approach the close of business, but it is difficult to vague the true sentiment seeing as US traders and investors are on holidays.

In London, the oil & gas sector is one of the biggest gainers as energy prices remain relatively high as supply levels of the underlining commodities are still squeezed. British banks like Barclays and HSBC are showing solid gains. Banks typically rally in an environment of higher interest rates, and that is likely to be the driving force behind the gains. The Bank of England lifted rates for the fifth time in six months last week. On the other side of the coin, the house building sector is firmly in the red as there are worries the UK property market will come under pressure now that rates have been lifted in an aggressive fashion. Stocks such as Berkeley Group, Barratt Development and Redrow are all down more than 3%.

The US dollar index has lost 0.25% as the US 10-year yield has pulled back from its highest mark in over 10 years. EUR/USD, GBP/USD and AUD/USD are all higher because of the dollar’s weakness. Gold is a little lower despite the slide in the US dollar. Lately, the metal has been trading in a range, $1,805 to $1,880, as it is being boxed in by the strong dollar and the fight-to-quality play.

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