FTSE Rallies On Global Economic Recovery Optimism

The FTSE, along with its European peers are pointing to a stronger start, boosted by upbeat data from the US and China. However, gains could remain capped in a quiet day for corporate releases and as the focus remains on US lawmaker’s ability to agree additional stimulus.

Chinese CPI rises
China’s consumer inflation accelerated for a second straight month in July. The CPI inflation gauge grew 2.7% yoy in July, up from 2.5% in June. On a monthly basis, prices increase 0.6%. Official data also showed that PPI which measures inflation at factory level rose 0.4% month on month.
The data adds to mounting evidence that the economic recovery in China is not only solid, but also gaining momentum, boosting optimism that the world’s second largest economy will offer serious support to the global economic recovery.

The data comes following Friday’s better than forecast non-farm payroll data. 1.7 million new jobs were created in the US in July and after President Trump signed executive orders over the weekend to extend unemployment benefits after Democrats and Republicans failed to agree a deal. Negotiations between the two parties are set to continue on Monday.

US – Sino tensions to cap gains
Concerns over rising US – Sino tensions are likely to weigh on sentiment, keeping gains in check. On Friday Trump signed executive orders banning TikTok and WeChat whilst also sanctioning Hong Kong's Carrie Lam. China has since arrested Jimmy Lai a pro-democracy media mogul angering the US. Most importantly for the markets this week US – China negotiators will meet to assess progress in the Phase 1 trade deal. This is what the market is really interested in. So far, Trump is driving a hard line on China heading towards the US elections.

Oil jumps 1%

Oil is pushing higher on Monday, extending last week’s gains, boosted by upbeat data from the US and China and by a bullish demand picture from Saudi Aramco, the largest oil producer in the world. State owned Aramco’s chief executive said that oil consumption in Asia, Aramco’s biggest market has almost returned to pre-covid levels. As economies across the rest of the globe continue to re-open he sees a similar pattern emerging. The rosy demand outlook, combined with Iraq saying it will cut production by a further 40,000 barrels a day to compensate overproduction over the past three months are overshadowing the stimulus deadlock in Washington, at least for now.

FTSE Chart

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