FTSE 100 makes gains on US relief fund and services recovery hopes

The FTSE 100 is poised to open higher this morning, as investors weigh up sentiment around a US recovery and await readings on the services industries across Europe.

London’s blue chip index was forecast to rise just 12 points to 5952, after Wall Street markets recorded their biggest daily gains since July.

Sentiment in markets continues to be out of lockstep with the wider economic picture across the globe, with major nations slipping into recession, including Australia this week.

Yesterday talks between Democrat Nancy Pelosi - the house speaker who caused a stir today by being spotted without wearing a mask inside a San Francisco hair salon - and US Treasury secretary Steven Mnuchin were enough to lift hopes around potential fresh stimulus Stateside, even though there was no clear sign of progress.

CMC Markets analyst David Madden said: “It would appear that traders welcomed the talk between Pelosi and Steven Mnuchin, US Treasury Secretary, even though they didn’t amount to anything – a conversation is at least a step in the right direction.

“The topic of the relief fund has been doing the rounds for weeks now. Originally, the Democrats were calling for a $3 trillion package, and they later said they would settle for a $2.2 trillion scheme. On the other side of the divide, the Republicans said they would be willing to go as high as $1.3 trillion deal.

“A gulf clearly remains, but the US non-farm payrolls report on Friday might put pressure on lawmakers, should there be a weak reading.”

Those non-farms follow ADP employment report figures yesterday which missed economists’ forecasts. Last month, 428,000 jobs were added, a step up on the 212,000 that were posted in July, but well below the forecast of 950,000.

Of the rise in US markets, which fed through to Asian indices overnight, Mizuho Bank said: “The irony of market exuberance is rich. Record highs on Wall St make a mockery of policymakers grasping for recourse to the worst downturn in decades.”

Edward Moya of Oanda warned: “Bullish stock market sentiment seems to be nearing a tentative peak as the labour market recovery stalls.”

In Europe, PMI services data through the morning is set to move the markets. Spain, Italy, France, Germany and the UK will publish their reports, and economists are expecting 48, 49.2, 51.9, 50.8 and 60.1 respectively. A reading over 50 indicates growth. The British report, due to at 9.30am, could help improve sentiment around the powerhouse in the nation’s economy, where many businesses were hampered by lockdown restrictions.

Bank of England governor Andrew Bailey is to give a speech on the future of cryptocurrencies and stablecoins at 3pm, so prices of key currencies like bitcoin may be in focus.

In corporate news, investors are awaiting updates from industrials giant Melrose, which owns engineer GKN, and hotelier PPHE to get an assessment of the manufacturing and leisure industries’ prospects for a post-Covid recovery.