Chinese stimulus and strong US earnings lift global sentiment

After a slow start the FTSE rallied higher, with strength in banking stocks and miners in addition to a positive start on Wall Street overshadowing weaker utilities and pressure from a stronger pound.

After a slow start the FTSE rallied higher, with strength in banking stocks and miners in addition to a positive start on Wall Street overshadowing weaker utilities and pressure from a stronger pound. 

Chinese stimulus package boosts miners
Miners powered ahead in Tuesday’s session, tracing metal prices higher. The unveiling of a stimulus package to lift domestic demand in China, the world’s biggest consumer of metals is going some way to counter trade war jitters. A package of tax cuts, research spending, special bonds, infrastructure spending and a pledge to use tax policy to stimulate growth shows that the authorities in China are concerned over the impact that the developing trade war will have on growth and are taking measures to counteract a weakening economy. 

This announcement comes after Chinese GDP grew at its slowest pace in the second quarter since 2016, with the deceleration in economic growth forecast to continue through the remainder of the year. 

Metal prices surged on the news, as a boost to the Chinese economy is translated into higher demand for metals. Higher metal prices lifted mining stocks with Anglo American, Glencore and BHP Billiton all charging over 5% higher. It wasn’t just miners that are benefiting from China’s plan, the proactive move has lifted sentiment across the globe.
Miners were also boosted by a rebounding copper price, as supply concerns increase amid a dispute in Chile’s Escondida mine, a major global source of copper.

Stellar earnings season takes Nasdaq to fresh record high
Wall Street was off to stronger start, with the Dow jumping 200 points higher on the open and the Nasdaq soaring 1%, hitting a fresh record high on earnings optimism after Google parent Alphabet smashed expectations.

Alphabet rallied 4.5% after reporting stronger than forecast top line results and an easing of costs, which had been pressurising margins. Alphabet have shown that recent investment has paid off. Facebook also tagged onto the rally, surging 2.1% whilst hitting a fresh all-time high.

Earning season is off to a strong start, of the 21% of S&P firms that have reported, 80.6% has beaten expectations for Q2 earnings, whilst 74% have surpassed expectations on earnings. These are the fundamental figures which are going to keep the equity rally alive given they offer the perfect distraction to trade war headlines. Until those trade war headlines are reflected in the data, these strong fundamentals will keep the bulls in charge.

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