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MARKET WRAP: FTSE finishes higher, BoE rate hike bets intensify

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Key Points

  • FTSE 100 closing price of 7,143.87, +0.7%
  • Miners and financials lift the FTSE
  • ASOS tumbles as CEO leaves, growth set to slow
  • GBP strong as BoE officials signal rate hike is coming
  • 10-year gilt yield hits highest since May 2019
  • Oil rally continues
  • Bitcoin surges above $57,000

By Samuel Indyk – The finished higher on Monday as higher interest rates lifted financials while miners were stronger as metals and coal prices remain elevated.

Focus in the UK was on comments from over the weekend. Firstly, Governor Andrew Bailey said he was “concerned” about inflation being above the central bank’s target. The latest projections from the Bank of England in August saw hitting 4% in Q4 and Bailey said he expects inflation to go even higher.

The comments were then followed up by an interview with Michael Saunders in the Telegraph. Saunders said he thought it was appropriate that the markets have been pricing in a “significantly earlier path of tightening” than they had done previously.

GBP was strong following the comments with trading at its highest level since 28th September and at its lowest level since 12th August.

The comments also lifted gilt yields with the benchmark hitting 1.219%, the highest level since May 2019.

The higher yields were helping UK banks whose margins should improve with higher interest rates. Standard Chartered (LON:), Lloyds (LON:), NatWest (LON:), HSBC (LON:), and Barclays (LON:) were all up by between 1%-2.3%.

Miners were also strong in the UK with Anglo American (LON:), Glencore (LON:), and Rio Tinto (LON:) at the top of the blue-chip index. Iron ore prices continue to trade near long-term highs while rose 8% overnight as torrential rain looks set to impact production in the Shanxi province. are at their highest level since 13th September.

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Elsewhere in the UK corporate space, ASOS (LON:) was in focus as shares declined despite a 36% increase in underlying pre-tax profit for the full year. The company added that revenue increased 22% but they expect that to slow to 10%-15% growth next year. The fast-fashion retailer also announced CEO Nick Beighton would be stepping down from the role with immediate effect.

“ASOS has enjoyed a huge boost to trading over lockdowns, albeit for less-lucrative casual wear as its core demographic was stuck at home,” writes Hargreaves Lansdown (LON:) Equity Analyst Sophie Lund-Yates. “However, the tailwinds are easing and the ASOS bubble has burst. Supply chain problems are going to continue for the foreseeable future, which is some explanation for why next year’s sales outlook is so disappointing.”

Finally, the price of continued higher on Monday as the world’s largest cryptocurrency traded above $57,000 for the first time since 12th May.

“Every time we hear various missives on why the cryptocurrency is due a big fall it defies gravity to continue to move higher, crushing the various bears in the process,” said CMC Markets Chief Market Analyst Michael Hewson.


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