The plural of stimulus

London investors are making up for the selloffs Monday by helping the FTSE march ahead in early trade; sentiment seems to have been changed by new financial support being readied in the US.

Charts (4)

London investors are making up for the selloffs Monday by helping the FTSE march ahead in early trade; sentiment seems to have been changed by new financial support being readied in the US.  The Federal Reserve has expanded its corporate bond purchase programme to provide fresh liquidity for the markets and the Trump administration is reportedly planning to pump as much as $1 trillion into infrastructure spending.

However, volumes of trade are slightly thinner than usual, indicating that some investors are cautious about the underlying state of the US and European economies despite the support packages. The thinner market also explains why price moves are more pronounced this morning.

Dividend play – Ashtead

Talk of the large US infrastructure package lifted construction hire firm Ashtead’s stock by 12%. Some investors were already attracted by the fact that the firm decided to pay out dividends this year despite losing half of its profits, but the final boost came because the new stimulus could help the firm make up for a sharp decline in its US operations, seen during the peak of the lockdown.

Travel firms, airlines and homebuilders are among the biggest gainers on the FTSE this morning. On the declining side of the index are only Admiral Group, Hikma Pharmaceuticals and publisher Pearson.

IEA confident about recovery in oil demand next year

The International Energy Agency expects oil demand to bounce back to a record-breaking level in 2021 once the coronavirus pandemic dies down. The agency forecasts that the fallout of the virus on oil demand will mostly be contained to this year, and supply and demand will rebalance by 2021. Brent crude has settled into a trading range of just below $40, slightly higher than yesterday, but investors are mostly waiting for fresh news to take the commodity higher.

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