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Market Report: Pulse of positivity for stocks as key central bank meeting gets underway

Written by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

A small pulse of positivity shot through the FTSE 100 on the open, following gains in Asia and on Wall Street, as the long awaited meeting of central bankers gets underway in the US.

Now the day has finally arrived, the nervousnesss which swept through indices earlier in the week has been kept at bay. The expectation that the US Federal Reserve will keep hiking rates to beat down inflation has already been priced in to some extent. Fed chair Jerome Powell will be choosing his words for his speech tomorrow ultra carefully, given that any nuance can be a market mover, and investors will be watching for any signs of the Fed’s flexibility or stubbornness in terms of its intended path of interest rate rises.

Tesla’s aim to make the shares more affordable for retail investors gave shares a lift before the split came into effect, although much of the gains evaporated towards the end of the session. The sheer weight of Tesla on indices helped lift the overall performance despite unease seeping through investors over just how much higher interest rates will go. With Tesla shares set to trade at a third of yesterday’s value, this more accessible price, may well draw more Musk fans to hold a tiny slice of the company. But it’s highly unlikely that shares will perform the same acrobatic jump which followed the last stock split given the caution surrounding tech stocks right now.

On the London market, British Gas owner Centrica’s shares lifted on the open before losing some ground, with investors largely shrugging off the impact of the company’s announcement to donate 10% of retail supply profits from British Gas into an emergency fund to help customers pay bills. This is small change given that although Centrica reported adjusted operating profits of £1.3bn in the six months to June, British Gas’s retail supply profits, came in at £98m. In terms of the scale of the energy crisis affecting homeowners, this is like holding a cake sale to mend a church roof, particularly as on Friday another expected painful rise in the price cap will see bills shoot up dramatically again.

On the wholesale market, gas is on a seemingly unstoppable march upwards again, a dramatic move which will intensify the energy crisis. UK gas prices reached levels not seen since March, while European gas prices set off like a rocket again amid persistent supply fears, reaching fresh record levels. Already plans are being brought in to save energy which will darken streets across Germany and make public buildings colder, but much tougher measures may have to be enforced given dwindling gas reserves.

The yawning gap of talent to fill the record level of vacancies in the UK has sent companies scuttling to recruiter Hays for help. Annual operating profit jumped by 128% to just over £210 million for the year ending June 30, up from £95.1 million a year earlier. The fight for staff has been intense since the pandemic eased, and although vacancies have dropped back a little in July they are still very high and payroll employment was also at a record. Investors expect that for now the company will keep making hay while the sun shines, but given the more ominous clouds hovering over the UK economy, these ultra favourable conditions for the recruitment market are at risk of receding.

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