Industry Comment: Housebuilders Help Drive FTSE Gains
Joshua Mahony, Senior Market Analyst at IG, discusses FTSE gains and stock activity.
“The FTSE 100 is being led higher by housebuilding stocks, while precious metals slump despite the impending FOMC meeting.
“European stocks are kicking off the day in a positive fashion, with hopes over a 2020 vaccine helping to ease some of the concerns around exactly how long this crisis will last.
“As Moderna heads into the third phase of their vaccine trial, it does feel as if we are entering the final stretch of a historic push for a solution to this pandemic.
“While markets have been burnt by heavily manipulated announcements from pharma firms working on treatments and vaccines, the fact is that we have multiple routes to success, as Pfizer, AstraZeneca, and Moderna all push to get their vaccines across the line.
“The big question for the short-term is whether the likes of the UK and US will be willing and able to extend much of the financial support provided throughout this crisis, with a failure to do so likely to spark a huge spike in unemployment as a result.
“Recent precious metal gains have come to an abrupt end this morning, with gold and silver collapsing in the space of just a few hours. The record highs in gold have helped miners such as Fresnillo to massively outperform of late, yet we are finally seeing evidence that there is no such thing as a one-way trade.
“Nevertheless, with the FOMC meeting kicking off today, we are likely to receive another reminder that we are set for a long road of loose monetary policy.
“The housebuilders are helping to prop up the FTSE 100 in early trade today, with investors jumping into a sector that has historically benefitted from each post-crisis period.
“With the recent stamp duty holiday expected to spark a resurgence in demand, speculation over the potential measures such as a help-to-buy extension adds yet another string to the bulls bow.
“Fears surrounding a potential spike in bankruptcies and job losses remain an issue for banks, yet the housing sector still has the opportunity to enjoy a particularly strong period as previously hesitant movers finally take the plunge thanks to government incentives.
“Alongside the stamp duty holiday, Johnson's promise to relax planning restrictions for new builds, and invest £12 billion in 180,000 affordable homes goes to highlight the boom that could be ahead for the sector.”