FTSE bounces as reopening continues

The FTSE has a bit of bounce in its step Monday morning with the mood lifted as the gradual reopening of the country continues.

Charts (3)

The FTSE has a bit of bounce in its step Monday morning with the mood lifted as the gradual reopening of the country continues. Open markets, car dealerships and schools are opening their doors for the first time in almost three months and the majority of high street shops are getting ready to follow suit from June 15.

But once the UK’s lockdown is fully removed, trading could become more fractious as it will become clear which businesses managed to survive the pandemic without major damage. UK bankers expect that over 40% of the small to medium-sized businesses that were part of the government’s loan scheme won’t be able to repay those loans once the lockdown is lifted, and although the government is meant to guarantee those loans it will be down to the banks to pursue debtors through courts.

The FTSE’s rally is echoed across the bourses in Europe except in Frankfurt where the DAX is struggling, weighed down by a slump in Lufthansa shares.

Oil prices are trading in jerky moves, unable to decide on a clear direction as investors try and second-guess the outcome of the upcoming OPEC meeting. As before during the corona crisis, major producers are pulling in opposite directions with Saudi Arabia wanting to extend cuts and potentially deepen them from July while Russia opposes the idea, assuming that the pick-up in demand will clear the glut over the next two months. 

Ted Baker shares have dropped more than 11% after the fashion brand said it plans a £95m stock issue. Rolls Royce has bounced back after a selloff last week when a major shareholder offloaded 96.7m shares. With the reopening across Europe investors are more reassured that a slow pick up in manufacturing, business and travel combined with Rolls Royce’s drastic job cut programme will help the company recover relatively quickly.

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