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MARKET WRAP: FTSE edges higher as homebuilders rally, oil slips

EconomyOct 13, 2021 16:09
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Key Points

  • Barratt Developments leads homebuilders higher
  • BT falls after HSBC downgrade
  • UK GDP recovers in August from July contraction
  • GBP strong after the data
  • Oil edges lower after OPEC report
  • Bitcoin slips below $55,000

By Samuel Indyk

Investing.com – The FTSE 100 edged higher on Wednesday, supported by a rally in homebuilders following a trading update from Barratt Developments (LON:BDEV).

Barratt said it was on track to meet its full-year targets set out when it published its most recent results, adding that it hasn’t encountered significant disruption for the supply chain issues impacting many industries. The positive update has seen Taylor Wimpey (LON:TW) and Persimmon (LON:PSN) also rally in sympathy.

“The housebuilders have found themselves in somewhat of a sweet spot,” said Hargreaves Lansdown (LON:HRGV) Equity Analyst Laura Hoy. “While pent-up lockdown demand is starting to wane, people are still motivated to move and that’s driven house prices higher. Ultimately Barratt looks on track to build on the strong momentum created by the pandemic”

At the other end of the index was BT (LON:BT) whose shares declined after a rating downgrade by HSBC. The bank cut its rating to Reduce from Hold citing potentially major shifts in the wholesale broadband market. The downgrade comes after recent reports that Sky was considering investing in Virgin Media O2’s wholesale network.

The UK economy recovered in August but the growth rate in the third quarter is slower than the rapid growth seen in Q2. GDP increased 0.4% in August, following a 0.1% contraction in July, according to the Office for National Statistics.

“The UK economy may have weathered the Delta Covid-19 wave better than we'd feared, but the recovery is nevertheless slowing,” ING analysts said in a research note. “This is one of the reasons why we think the Bank of England will wait until 2022 before hiking - but perhaps more importantly - it implies markets may be wrong to price interest rates at 1% or higher in the next few years.”

GBP shrugged off the mixed data with GBP/USD moving higher amid USD weakness. The softer USD comes after the US Dollar Index hit a cycle high on Tuesday and yields have fallen in the US.

“The USD drift likely reflects a consolidation of recent gains rather than any change in broader sentiment,” said Scotiabank analysts. “After a near 3% rise in the DXY since the start of September, some corrective price action would not surprise at this point.”

Brexit is back in the headlines but is not currently having a major currency impact with the EU offering an olive branch regarding the trade situation in Northern Ireland.

WTI and Brent crude futures both slipped but the former was holding above $80/barrel at pixel time. The latest monthly oil market report from OPEC had the cartel cutting its oil demand forecast for this year by 160,000 bpd, however, 2022 demand growth was unchanged.

Focus was also on comments from Russian President Vladimir Putin, who said that it could be “quite possible” that oil prices hit $100/barrel.

Bitcoin has edged lower again on Wednesday with momentum to the upside slowing following the recent gains. The world’s largest cryptocurrency briefly traded below $55,000 although found some support around Tuesday’s low before bouncing.

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MARKET WRAP: FTSE edges higher as homebuilders rally, oil slips
 

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