UK FTSE 100 index climbed to 7,538 this morning, just 2% below its year high and is now back above its pre Russian invasion of Ukraine levels.
The spark in confidence across markets with China up 2.31% and Hong Kong up 5.24% today is a measure of the reaction to China confirming that it is taking action, after mass protests, to increase the rate of vaccinations, in particular for the elderly, and hopes that China will ease its zero tolerance lock down policy to covid-19 outbreaks.
China is the world’s second largest economies and a number of FTSE 100 firms in banking, insurance and mining ply a lot of their trade with China. Less lockdowns and an econony that may be opening up is good news for firms such as Prudential and Standard Chartered.
European markets have also risen but not anything like the UK or Far East.
We are nowhere near being ‘out of the woods’ yet. If China does open up, oil and fuel prices will rise with greater demand. This will create ‘tough to shift’ lingering inflation as we have already predicted but, much longer than markets are currently expecting.
We say it yet again that whilst we are positive in the medium term, some forecasters even predicting FTSE 100 to go over 8,500 in January 2023, the bouncing ball of markets will still remain and you should plan for more volatility over the next 18 months.