Profits at Google also boosted sentiment as advertising returned following last year’s Covid lull
The FTSE 100 was set to rise again today after yesterday’s strong session prompted by positive news on vaccine rollouts in the UK and US and the "Reddit effect" on hedge funds faded.
Retail investors rallying each other to buy heavily shorted stocks have caused huge losses for certain hedge funds last week but on Monday and Tuesday they were nursing severe pain themselves as the stocks they boosted crashed down.
GameStop, their cause celebre, more than halved by the close of play last night.
That in turn relaxed fears of hedge funds having to sell other shares in order to raise cash to fund their losses on the Reddit stocks.
After a strong performance for Wall Street, the FTSE 100 was being called up 28 at 6543 this morning on IG Index’s trading platform.
Stellar profits at Google boosted sentiment as advertising returned with a vengence following last year’s Covid lull. Earnings from the group’s parent Alphabet last night talked of a surge in ads during the tail end of the year, triggering shares to leap 8% after hours.
That should be good news for UK big tech funds such as Scottish Mortgage Investment Trust, run by Baillie Gifford, which was one of Britain’s best performing stocks last year.
Chief financial officer Ruth Porat said the fourth quarter rally was like the one seen after the 2008 financial crisis: “a broad-based reengagement across industries”.
Tech funds will also be watching the market reaction to Jeff Bezos’ decision last night to step aside at the top of his Amazon empire, moving from chief executive to executive chairman so cloud computing head Andy Jassy can step up.
Jassy’s AWS division, which hosts cloud computing for millions of businesses, made $3.6 billion of profit in the last quarter, making it the most lucrative part of the entire company.
Although the FTSE had a strong session yesterday, Big Oil was proving a drag on global markets after huge losses from BP and ExxonMobil. Exxon declared losses of more than $20 billion last year and BP declared its first loss since the Deepwater Horizon tragedy in 2010.
Markets are now nervous around Thursday’s full year figures from Royal Dutch Shell amid fears of a $19 billion loss.
Jefferies stockbrokers issued a note on BP this morning urging shareholders to hold, rather than sell the shares. It focused on the supermajor’s targets for paying down its debts, which remain on course, meaning share buybacks should start in late 2021 or early 2022.