The FTSE 100 has begun the week in a bullish mood with the benchmark rising some 45 points to trade close to its one-month high. The pound is showing little direction on the whole, at the start of what could be a pivotal week for the currency with the Bank of England set to announce its latest monetary policy on Thursday.
Risk assets in demand
There’s been a distinct risk-on mood in markets at the start of the week with stock indices rising, whilst safe-havens such as Gold and the Japanese Yen have fallen lower after impressive recent gains. There’s not really been any positive news to support these moves over the weekend, although the absence of bad news could be seen to have given stocks a de facto boost. Hurricane Irma made landfall in Florida yesterday and even though there has been devastating damage to anything in its path, the early estimates are that the repair bill could be not as bad as first feared.
Absence of bad, rather than good, news
Irma has now weakened to a category 1 storm and hopefully the worst is over for the second major natural disaster in that part of the world in as many weeks. Markets have been acting somewhat defensively in recent weeks, with the threat of a man-made disaster involving North Korea growing markedly. However, a weekend without any signs of further escalation has seen this slip further back in the mind of traders for now, and whilst the potential threat is unlikely to disappear entirely anytime soon, there has at least been a pause in the rising geopolitical tension between Washington and Pyongyang. It may seem a little perverse for stocks to rise on simply the absence of bad news, but viewed from an alternative perspective even after all the negative developments in recent weeks the markets have held up relatively well seeing only limited downside. Bull markets climb a wall of worry, and, for now at least, equity benchmarks in London, Frankfurt and New York remain firmly in bull market territory.
Insurers rise as Irma fades
The insurance sector for London-listed stocks has risen this morning, with the market appearing to assume that the fallout from Hurricane Irma will be less devastating than originally thought. To be sure, there has still been substantial widespread damage with the total cost of the storm expected to run into the hundreds of billions of dollars, but increases in excess of 1% for Prudential (LON:PRU), Legal & General and Admiral Group (LON:ADML) today suggest that maybe a greater downside than that which occurred had been priced-in ahead of the weekend. A notable drop of around $10/oz in the price of Gold since Friday has weighed on Randgold Resources (LON:RRS) and Fresnillo (LON:FRES), with these two stocks residing amongst the worst performers at the foot of the index and trading firmly in the red.