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FTSE rallies after earnings, USD falls after Fed, Bitcoin rally fizzles near $40K

EconomyJul 29, 2021 16:35
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Key Points

  • FTSE 100 closing price of 7,076.4, +0.85%
  • Earnings from Shell, Anglo American , Informa , Rentokil lift FTSE
  • BT, Smith + Nephew underperform following results
  • USD falls after Fed
  • Oil higher, Brent > $74
  • Bitcoin breaks above $40,000 but struggles to maintain rally

By Samuel Indyk – The FTSE 100 rallied on Thursday, benefitting from (mostly) strong earnings reports from a number of bellwether stocks.

Royal Dutch Shell (LON:RDSa) shares soared after the company launched a share buyback and raised its dividend following a strong quarter as oil prices rose.

“There will be questions raised about whether the pay outs planned are far too generous given the scale of the mountain Shell still has to climb to reduce its carbon emissions,” said Hargreaves Lansdown (LON:HRGV) Senior Investment and Markets Analyst Susannah Streeter. “Although Shell says it will now move to the second phase of allocating capital to power its transition strategy, these results are likely to lead to fresh calls to accelerate its move to renewables.”

Anglo American (LON:AAL) shares also jumped after increasing payouts to shareholders following the commodity price boom. The metals miner said it plans to return $4.1 billion to shareholders after reporting record profits in the first half of the year.

Rentokil (LON:RTO), Informa (LON:INF), Relx (LON:REL) and BAE Systems (LON:BAES) also traded near the top of the FTSE 100 following results.

At the other end of the spectrum was BT (LON:BT). The telecommunications firm reported lower than expected revenue and a drop in pretax profit in the first quarter.

Medical equipment company Smith & Nephew (LON:SN) also underperformed despite a jump in revenue and profit in the first half. The company maintained its revenue growth outlook but said this was based on the assumption that surgery volumes are not impacted by the pandemic in the second half.

In FX markets, the US Dollar Index was weaker following the Fed interest rate decision and press conference from Jerome Powell on Wednesday.

The Fed Chair said they are still “some ways off” from hiking interest rates and reiterated the view that the current rise in inflation is “transitory”.

GBP/USD benefitted from the softer USD with the pair heading back towards 1.40. Focus may now turn to next week’s Bank of England interest rate decision with MPC members Saunders and Ramsden likely to cement their place in the “hawkish” camp.

WTI and Brent crude futures were both trading higher as falling US inventories outweighs stubborn Covid cases across the globe.

“The energy complex has continued its march higher as the EIA data showed a decline of 4.1 million barrels in US crude stockpiles to 435.6 million barrels, their lowest levels since January 2020,” notes StoneX Energy Analyst Kevin Solomon.

Looking ahead, Solomon highlights the 5th August inauguration of Iranian President-elect Ebrahim Raisi as the potential next catalyst for a move in oil prices.

“We could see developments on the Iranian Nuclear Deal become increasingly influential in the price action over the coming weeks,” Solomon said.

Cryptocurrencies were broadly steady with Bitcoin again peaking its head above $40,000 before falling back below. The world’s largest cryptocurrency again found resistance near the 100 day moving average around $40,300 before retreating.

“We're probably just seeing a little profit taking at an interesting technical resistance level because of how we traded here late-May and mid-June,” said OANDA Senior Market Analyst Craig Erlam. “It feels like there's a lot more momentum behind it this time which may ultimately see it smash through here and eye much higher levels not seen for a few months.”


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FTSE rallies after earnings, USD falls after Fed, Bitcoin rally fizzles near $40K

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