FTSE 100 ends higher and gold surges as investors bet on stimulus
The FTSE 100 closed higher and US stocks rose as investors hoped Democrats and the White House would strike a new stimulus deal, while gold surged to a fresh all-time high.
London’s blue-chip index ended the day one per cent higher at 6,098 points. The FTSE 250 of mid-cap firms jumped 1.7 per cent.
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In Europe, Germany’s Dax rose 0.5 per cent as optimism spread on the continent. France’s CAC was up 0.8 per cent.
On Wall Street, the S&P 500 rose 0.7 per cent. The Dow Jones climbed 1.3 per cent and the Nasdaq jumped 0.4 per cent.
Meanwhile, gold smashed through the $2,000 barrier. It jumped 1.3 per cent in afternoon trading to $2,046 an ounce.
Investors have prayed for progress in the next round of US stimulus talks. But it has been hard to come by, causing a shaky couple of weeks for the FTSE 100 and global markets.
Markets were excited today, however, as US politicians “talk up the prospects of another relief package,” said Craig Erlam, senior market analyst at currency firm Oanda.
“Lawmakers appear encouraged by the progress of the last couple of days, with Treasury Secretary Steve Mnuchin talking up the prospects of a deal by the end of the week.”
Gold miners boost FTSE 100
The record-breaking gold price boosted many London-based miners, helping the FTSE 100 and FTSE 250.
Polymetal International rose six per cent and Fresnillo climbed 6.3 per cent on the blue-chip index. On the FTSE 250, Hochschild Mining soared 13.7 per cent. Centanim climbed 8.8 per cent.
Chris Beauchamp, chief market analyst at trading platform IG, said: “Even the lacklustre FTSE 100 has managed to stage a decent rally.”
“Gains have been helped along by the other big story, that of gold’s dizzying ascent to $2,000.”
Beauchamp said it “shows how conflicted investors are” that both equities and gold, a safe-haven asset, are rising at the same time.
He said they “can’t avoid being tempted by equities” but are also worried by terrible earnings reports and bankruptcies.
Luca Paolini, chief strategist at Pictet Asset Management, said he doubted that markets can rally much further in the months ahead.
“Coronavirus cases around the world are still rising, and corporate earnings expectations for this year are still too high.”
Gold surge continues as FTSE 100 climbs
The rising gold price was driven by expectations of more fiscal and monetary stimulus, analysts said. The yellow metal is seen as a hedge against inflation and currency debasement. Its rise has coincided with the dollar dropping to two-year lows.
David Madden, market analyst at trading platform CMC Markets, said: “The aggressive easing policies of central banks around the global have put big pressure on bond yields, some of which turned negative.”
“This has been a factor in the metals’ popularity as some investors are turning to gold and silver.” Silver surged to $26.80 an ounce.
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Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: “So far, we haven’t seen much profit-taking on the recent push. It will be interesting to watch how investors behave above the $2,000 mark.”