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FTSE 100 up after BoJ shock, commodity stocks support

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By Johann M Cherian and Shristi Achar A

(RockedBuzz via Reuters) – The UK’s blue-chip FTSE 100 moved higher on Tuesday, as surging shares of oil and mining majors helped shrug off initial weakness following a surprise change in monetary policy by the Bank of Japan (BoJ).

The blue-chip FTSE 100 finished up 0.1%, moving further away from the one-month lows hit last week.

The energy and industrial metals index rose 0.7% and 1.1% respectively, as a weaker dollar pushed commodity prices from oil to copper. [O/R] [MET/L]

Hurting global sentiment, the BoJ expanded controls on long-term yields that allow long-term interest rates to rise further, becoming the latest central bank to join the global monetary policy tightening camp.

Government bond yields rose across the board, keeping equity markets under pressure.

“Bond yields are still rising as investors look to price in further tightening next year, however the initial knee-jerk reaction (at the BoJ) has been tempered by the fact that this was likely to happen in the new year anyway,” said Michael Hewson, lead market analyst at CMC Markets UK.

“Rising commodity prices are helping to boost inventories of basic resources.”

The FTSE 100 has remained resilient this year in the face of mounting inflationary pressures and worries of a recession, as surging commodities and a weakening pound pushed the externally focused index down by just 0.1% year-to-date.

“The UK market is well positioned because it’s generally a lower valued market, getting higher earnings per share. And we’re entering a decade where fiscal policy is going to be very important,” said Emma Mogford, fund manager of Premier Miton Monthly Income Fund.

“Markets are likely to prefer companies that have profits today and tomorrow, rather than the promise of profits in the distant future.”

However, the nationally exposed FTSE 250 Index fell 0.6% to hit a six-week closing low.

Among individual stocks, Petrofac Ltd lost 3.2% after plunging as much as 10% on the day after the oil services provider warned it could post an operating loss for the year.

Sage Group slipped 2.8% after UBS downgraded the software company to ‘sell’ from ‘neutral’.

(Reporting by Johann M Cherian and Shristi Achar A in Bangalore; Editing by Maju Samuel and Krishna Chandra Eluri)