Banks and Miners Lead FTSE Higher

The FTSE charged higher on Wednesday, led by the banks and miners and helped with a dose of improved confidence from US – Sino talk progress.

The FTSE charged higher on Wednesday, led by the banks and miners and helped with a dose of improved confidence from US – Sino talk progress. The FTSE rallied 0.5% across the session heading into the close comfortably above 7200 despite supermarkets taking a hit.

Sainsbury’s dived to the bottom of FTSE shedding 16% as the Sainsbury Asda merger was thrown into serious doubt. Britain’s competition watchdog raised concerns over the tie up between the UK’s second and third largest supermarkets, including reduced quality and choice for customers, in addition to higher prices. There were always doubts as to whether this one would make it past the CMA. The analysis by the CMA suggests this deal has been knocked on the head and the shares have dropped accordingly.

Lloyds impresses
Lloyds was at the other end of the scale as it shrugged off fears over Brexit. Investors cheered a £4 billion payout to shareholders, despite smaller than expected annual profits. The UK bank reported a 24% rise in profits in 2018 to £4.4 billion, below the £4.6 billion forecast. The dividend was lifted by 5%. 
Shares in Lloyds rallied 5% to 61.3p, a level last seen in September 2018. Investors were happy to jump onto Lloyds’ optimistic tone even when other banks have been warning over the near-term outlook and Brexit.

Miners trace metal prices higher
Miners put in a strong performance as they traced base metal prices higher. As optimism continues to build over progress in US – Sino trade talks, metal prices are finding themselves well supported. Anything that supports China, the world’s largest consumer of metals, economy will support metal prices. 
More generally optimism that the US and China were making headway in a second week of trade talks helped lift sentiment. The March 1st trade truce deadline is starting to look more fluid which is taking some of the pressure off. Whilst we know the talks are complex, both sides appear to be keen to get some form of deal hashed out sooner rather than later.

Investors look ahead to Fed minutes
The pound was neutral versus the dollar as investors digested party deflectors to the Independent Group and looked ahead to the release of the Fed’s minutes from the January meeting. The minutes are unlikely to be supportive of the dollar. Investors will be watching closely for further clues for the Fed’s abrupt change of direction for monetary policy. Let’s not forget that in December the Fed hikes rates for a fourth time and indicated further rate rises across 2019. Just six weeks later and the Fed was pressing pause on the hike button. 

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