The FTSE 100 edged higher after two days of declines, taking its cue from the US, where technology stocks mounted a small recovery overnight after sharp falls.
The blue chip index rose 45 points, or 0.7%, to 6,636, after touching two-week lows yesterday in response to a slump in tech stocks which pushed the S&P 500 into its biggest three-day drop in two months.
However, US woes appear to have abated, with shares in Amazon, Facebook, Netflix, Google and LinkedIn all stabilising, and the technology-heavy Nasdaq index adding 0.8% in its last session. UK tech stocks bounced back this morning with semiconductor designer ARM Holdings (ARM.L) amongst the FTSE risers, adding 18.5p, or 1.9%, to £10.03.
Investors were still proceeding cautiously, however. ‘Negative cues seem to be popping up out of nowhere, like the US tech sell-off and the Ukraine flaring up again, ‘said Jonathan Sudaria, dealer at Capital Spreads. ‘Traders are highly cognisant that if you get a few more negative news stories we could easily see the balance tipped in favour of a more sustained sell-off.’
Housebuilders fared well after analysts at Deutsche Bank published a positive note on the sector. Barratt Developments (BDEV.L) led the sector, up 13p, or 3.4%, at 394.2p, while Persimmon (PSN.L) traded up 17p, or 1.3%, at £12.97.
Deutsche Bank analysts Glynis Johnson and Manu Rimpela said concerns over a sooner-than-expected rise in interest rates, which had hit housebuilder shares, had been exaggerated. ‘With easy affordability, significant lending aspirations from banks combined with a willingness to reduce their spreads further we believe the share price reactions have been overdone,’ they said. ‘We see this as an interesting buying opportunity.’
After yesterday’s surprisingly good manufacturing and industrial production figures, the latest figures on the UK trade deficit offered a more mixed picture. The trade deficit in February narrowed to £2.1 billion, while the figure for January has been revised down from the previous £2.6 billion to £2.2 billion. However, the narrowing is due to imports falling more than exports rising.
‘Looking ahead, net trade will likely struggle to make a sustained, significant positive contribution to UK growth in the near term at least as imports are likely to continue to be underpinned by decent UK domestic demand,’ said Howard Archer, economist at HIS Global Insight.
‘Nevertheless, the hope has to be that exports will increasingly benefit from global growth gradually picking up over the coming months.’
Investors are looking ahead to the publication of minutes from the Federal Open Market Committee this evening, which should offer more pointers on US monetary policy.