FTSE-100 jumps after US Federal Reserve sends mixed messages over banks' strength
Not everyone is hoping for shares to continue their bumpy recovery since the trough of March, it seems.
Terry Smith, the fund manager behind the respected Fundsmith stock picking giant, has set up a hedge fund with a view to taking "short" bets against stocks which are overvalued, Citywire reported today. It's deemed a significant move because Smith has such a big name in the investment world, having seen huge successes with his long-only strategies at his other funds.
Fundsmith Long/Short is not thought to have begun trading yet but today would not have had a good day for its short punts if forecasts are anything to go by.
The FTSE-100 jumped 88.3 points to 6234.38, along with similar decent gains in Germany and France.
The Federal Reserve last night capped dividends and banned share buybacks from big banks in the US after its analysis of Covid-19 has the potential for triggering $700 billion of loan losses, pushing some banks close to their capital limits. Share prices of banks there jumped in advance of the announcement of stress test results but some then fell in after-hours trading, with Goldman Sachs and Wells Fargo both falling more than 3%.
The Fed set new capital requirements which some analysts calculated put Goldman slightly below its new minimum. However, it also freed up some of its previous restrictions to make it easier for banks to lend to certain categories such as private equity investments.
Generally the news lifted sentiment in global markets and Asian shares were up today more than 1%, setting a fair wind for European stocks. Later this morning will see French consumer confidence numbers for June with a likely strong rebound from the improving May figures. Later comes US data on personal income and spending - a key measure of consumer confidence in the world's biggest economy.
Intu's £4.5 billion debt negotiations failed to succeed today and it appointed administrators this afternoon, meaning some of its huge shopping malls could be forced to close. The owner of Lakeside has created a dizzyingly complicated debt structuring, borrowing both at group levels and on the individual mall properties. It was in a crisis long before covid arrived.
MORE ABOUT