Banks and Life Insurance shares lent their heft to Tuesday’s somewhat atypical advance in the stock market, in so far as UK and European indices outperformed their peers on Wall Street by a wide margin.
Triggering the move, over the holidays the Bank of Japan tweaked its so-called yield curve control policy.
Indeed, some analysts in the City believed the move constituted far more than a tweak and foreshadowed a higher floor for interest rates globally.
And yet, on Tuesday longer-term Gilt yields unwound some of the gains seen just before the Christmas break, mimicking both in the US and over in the euro area.
The pound and euro also gave back some ground, particularly the latter, as some traders returned from the holidays and opened positions.
Against that backdrop, interest rate sensitive defensive areas of the market, such as Electricity and Utilities fell to the bottom of the leaderboard.
Autos&Parts were also especially weak, possibly as investors caught up with news regarding the surge in Covid-19 infections in China as the country attempted to reopen despite criticism that not all of the needed precautions had been taken.
Concern over the war in Ukraine – alongside those around Covid, US/China tensions and inflation globally – also dampened investor sentiment as some analysts warned that the conflict could yet become more “hideous”.
Writing in Bloomberg, historian Niall Ferguson echoed a recent opinion piece for The Spectator in which former US Secretary of State Henry Kissinger warned against repeating the mistake made during World War I of not pursuing talks while they were still possible.
In particular, Ferguson noted Palantir Technologies co-founder Alex Karp’s recent comments in a Washington Post interview to the effect that the US and its allies were providing Ukraine with “advanced algorithmic warfare systems” equivalent to having tactical nuclear weapons.
He also took issue with the Biden administration’s apparent decision to delegate to Kyiv the timing of any peace talks and the fact that the preconditions being set for Russia were “manifestly” unacceptable for Moscow.
As for Kissinger, one of his recommendations was that: “if the pre-war dividing line between Ukraine and Russia cannot be achieved by combat or by negotiation, recourse to the principle of self-determination could be explored.
“Internationally supervised referendums concerning self determination could be applied to particularly divisive territories which have changed hands repeatedly over the centuries.”
Top performing sectors so far today
Leisure Goods 22,148.27 +2.96%
Construction & Materials 7,071.31 +2.75%
Banks 3,385.98 +2.08%
Life Insurance 7,245.20 +1.97%
Real Estate Investment Trusts 2,288.00 +1.63%
Bottom performing sectors so far today
Electricity 10,344.52 -3.76%
Automobiles & Parts 1,514.85 -1.89%
Beverages 27,552.90 -1.41%
Gas, Water & Multiutilities 5,664.08 -0.91%
Industrial Metals & Mining 7,823.68 -0.83%
