Global markets rally back as bond trading calms

Global markets rebounded strongly as the bond markets calmed down following turbulent trading last week.

Bond yields recovered after a major sell-off last week amid trader worries over inflationary pressures and the potential for central banks to tighten their monetary policies.

The FTSE 100 closed 105.1 points, or 1.62%, higher at 6,588.53 at the end of play on Monday.

David Madden, market analyst at CMC Markets UK, said: “Equity markets have shaken off the negative sentiment that was doing the rounds last week as the pullback in government bond yields has seen buyers step into the fold.

“Yields have cooled in light of the updates from central banks that they will not be pushed around by the bond market.

“Traders feel more confident about snapping up relatively cheap stocks as they are less fearful that central banks will look to tighten their policy anytime soon.”

Across the continent, the European Central Bank’s (ECB) chief economist talked about flexibility regarding bond purchases, helping to keep the major indices afloat.

The German Dax and the French Cac both moved 1.57% higher.

In the US, the Dow Jones surged as steadying bond markets helped focus move back to President Biden’s stimulus plans, which is now being debated by the country’s Senate.

Meanwhile, sterling ended the session higher despite a cool-down in sentiment following strong early trading driven by the continued progress in vaccinations.

The pound increased by 0.04% versus the US dollar to 1.394 and was up 0.17% against the euro at 1.156.

Housebuilders were among the days winners, with Taylor Wimpey, Persimmon and Berkeley making strong gains on Monday following weekend reports that the Chancellor will unveil a mortgage guarantee scheme in Wednesday’s Budget announcement.

In company news, Halfords shares jumped again after the retailer said soaring bike sales were set to help it almost double company profits for the current year.

The company said it expects pre-tax profits for the year ending in April will hit between £90 million and £100 million, up from £52.6 million a year earlier and significantly above analyst forecasts.

Shares closed 21p higher at 310.5p as a result.

Wagamama owner The Restaurant Group finished the day higher after it secured around £500 million in loans to shore up its finances.

Shares increased by 3.6p to 112.5p as it hailed “very encouraging” delivery and takeaway sales as it restaurants remain shut to sit-down customers.

Publishing giant Reach slid after it revealed a collapse in its profit following a number of one-off costs.

Shares fell by 20.5p to 218p after its pre-tax profit went from £120.9 million in 2019 to just £400,000 in 2020.

The price of oil increased but was down from its intra-day highs driven by speculation of supply cuts and optimism surrounding the US’s planned spending scheme.

The price of Brent crude oil increased by 0.29% to 64.61 dollars per barrel.

The biggest risers on the FTSE 100 were IAG, up 13.35p at 205.3p, Taylor Wimpey, up 8.95p at 166.55p, Pennon, up 48.2p at 922.2p, and Persimmon, up 139p at 2,729p.

The biggest fallers on the FTSE 100 were HSBC, down 6.05p at 420.15p, Informa, down 7p at 543.8p, Ocado, down 24p at 2,176p, and Tesco, down 2.2p at 222.6p.