Sector movers: Vodafone buoys Telecoms, Banks track gains in yields
By Alexander Bueso
Date: Tuesday 24 May 2022
(Sharecast News) - Telecommunications Service Providers, Automobiles and Parts, and Banks paced gains on the FTSE 350 at the start of the week.
Buoying the former was Vodafone as last week's news that Etisalat had built up a stake in the carrier continued to buoy the shares, according to traders in the City.
In parallel, lenders' shares jumped as longer-term government bond yields bounced back with that on the 10-year Gilt climbing by eight basis points to 1.971%.
On Friday, St.Louis Fed President again called for short-term official interest rates to be hiked to 3.5% by the end of 2022.
"The more we can front-load and the more we can get inflation and inflation expectations under control, the better off we will be. In out years -- '23 and '24 -- we could be lowering the policy rate because we got inflation under control," Bullard reportedly said according to Bloomberg.
On a related note, on Monday, European Central Bank chief, Christine Lagarde, all but pre-announced a July lift-off in interest rates and said they would be out of negative territory by the end of September.
Further boosting UK stocks in particular, JP Morgan strategist, Mislav Matejka, reiterated his preference for Value over Growth.
Matejka also said that the UK remained the broker's key 'overweight' among developed markets.
The strategist added that a downturn in consumption in DM was not inevitable, unless labour markets began to "deteriorate meaningfully".
Furthermore, household savings rates which were even now only back at their long-term averages may smooth any hit to consumption, helped by a peak in inflation with the latter likely happening now.
Wages meanwhile might remain in an uptrend, he posited.
"So far, our high-frequency credit card spending data from Chase is not showing much of a deterioration, more a rotation out of goods towards services," he explained.
"Consumer cyclical plays, such as Autos, Airlines and Retail, have performed poorly since the start of the conflict in Ukraine, with a lot of negativity already priced in."
As an aside, it was forecasts for resilient job markets that led analyst at Citi to sound a bullish note on Monday as regards the outlook for euro area banks.
Industrial Metals and Mining were also up thanks to an advance in Ferrexpo, on reports that US President, Joe Biden, was planning to discuss US trade tariffs on Chinese imports with Treasury Secretary Janet Yellen upon his return from a trip to Asia.
On a related note, in the Personal Goods space, Superdry did well on Monday, but it was further gains for Burberry that helped the sector the most.
Shares in the luxury fashion retailer, which had a significant exposure to China, appeared to be trying to consolidate at least a near-term bottom.
Top performing sectors so far today
Telecommunications Service Providers 3,172.22 +3.24%
Automobiles & Parts 2,054.06 +3.01%
Industrial Metals & Mining 7,652.00 +2.88%
Banks 3,154.10 +2.45%
Personal Goods 27,155.56 +2.42%
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