Here comes the market rebound, but can it last?

Markets

“After the big crash comes the recovery rally. Unfortunately the scale of the rebound is lacklustre at best, suggesting that investors remain extremely nervous,” says Russ Mould, Investment Director at AJ Bell.

“Oil prices jumped 5% following yesterday’s catastrophic collapse yet stock markets could only muster in the region of a 1% to 2% rebound. On a normal day gains of that scale would be celebrated but in the context of yesterday’s very large sell-off the rebound only recovers a fraction of the lost territory.

“Asia led the rebound with Hong Kong’s Hang Seng index rising 1.5% and Japan’s Nikkei 225 index advancing 0.9%.

“In the UK, the FTSE 100 was up 2.1% in early trading, led by oil producers Royal Dutch Shell and BP, together with miners Rio Tinto, Anglo American and Antofagasta. Even troubled holiday seller TUI saw a bounce, up 5.1% as investors started to consider if its shares have been oversold.

“Having touched $1,700 per ounce on Monday, gold slipped back 0.9% to $1,664 per ounce as investors trimmed profits in the precious metal and tentatively put money to work in equities once again.

“Investors will need a few days like today to rebuild their confidence. What will help is a widespread recovery rather than just concentrated on a few sectors. The FTSE 100 on Tuesday did see gains in multiple sectors and the only main detractor was utilities.

“Supermarkets were in demand again as the market is clearly expecting them to get an earnings boost from customers stockpiling toilet roll and tinned goods. Tesco’s shares were up 2.8% on Tuesday and Ocado was close behind, up 2.2%.

“The next phase of Britain’s response to the coronavirus outbreak is to get people with mild symptoms to self-isolate. This implies a step-change in the number of people expected to stay at home in the coming weeks, thus driving more traffic to supermarket websites and stores as households prepare for lockdown.”

These articles are for information purposes only and are not a personal recommendation or advice.