Sterling slide boosts exporters, US inflation casts shadow over markets and Fresnillo shines as investors look for safe havens

“Once again in 2022 the FTSE 100 is doing a smidge better than other global markets but, before UK investors get too excited, a big slide in sterling is a significant contributing factor to the outperformance,” says AJ Bell Investment Director Russ Mould.

“The mood out there is pretty grim, with the relief rally seen in late May starting to feel like a distant memory. You know things are bad when the best performer among the UK’s top stocks is precious metal producer Fresnillo as investors reach for traditional safe havens.

“Cryptocurrencies’ hopes of supplanting gold as a defensive asset have taken yet another buffeting as they continue to suffer heavy falls.

“The hangover from a higher than expected US inflation reading is continuing to cause scissoring pain throughout the markets, as it extinguishes the hope the US Federal Reserve might be able to take its foot off the pedal on interest rate rises.

“The FTSE 100’s relative resilience today is supported by its bevy of exporters, whose overseas earnings are boosted by the falling pound – the currency is in freefall as a shock drop in GDP raises fears of a recession.

“Background factors like the ending of the test and trace programme contributed to the weak figures but there was barely room for encouragement with most parts of the economy performing worse than expected.

“There looks to be precious little economic respite in sight with any boost from the Platinum Jubilee fading into the middle distance, energy prices remaining stubbornly high and another lifting of the price cap on gas and electricity still to come in October.

“While there has been some state support for households to cushion the blow of a cost of living crisis, many businesses, particularly smaller ones, are facing their own cost of operating crisis as they contend with big fuel bills, staff shortages, rising wages and supply chain problems. Expect calls for support for the corporate world to get louder.

“Investors are likely to remain jittery at least until the Fed has delivers its verdict on rates on Wednesday, with the Bank of England following suit a day later.”

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