Pulse of positivity for FTSE 100 as key central bank meeting…

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  • FTSE 100 opens higher after gains on Wall Street and Asia
  • US central bankers meet in Jackson Hole Wyoming amid inflation concerns
  • Tesla shares rise ahead of the stock split taking effect today
  • Centrica rises after pledge to donate select retail supply profits to help customers
  • UK recruiter Hays basks in the sun as record vacancies boost profits

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Q2 2022 Hedge Fund Letters, Talks & More

The FTSE 100 opens on a positive note

A small pulse of positivity has crossed the FTSE 100 into broad daylight, following gains in Asia and on Wall Street, as the long-awaited meeting of central bankers begins in the United States. Now that the day has finally arrived, the jitters that swept through the indices earlier in the week have been brought under control. The expectation that the US Federal Reserve will continue to raise rates to fight inflation has already been priced in to some extent. Fed Chairman Jerome Powell will choose his words for his speech tomorrow very carefully, as any nuance can be a market mover, and investors will be watching for any signs of Fed flexibility or stubbornness in terms of the expected path of rising interest rates. .

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Tesla Inc’s (NASDAQ:TSLA) goal of making stocks more affordable for retail investors gave shares a boost before the split took effect, though much of the gains have evaporated towards the end of the session. Tesla’s sheer weight in the indexes helped improve overall performance despite investor unease over the magnitude of the interest rate hike. With Tesla shares expected to trade at a third of their value yesterday, this more accessible price may well entice more Musk fans to own a tiny chunk of the company. But stocks are highly unlikely to make the same stunt jump that followed the last stock split given the caution surrounding tech stocks at the moment.

Centrica and Hays

In the London market, shares of British Gas owner Centrica PLC (LON:CNA) rose in broad daylight before losing ground as investors largely ignored the impact of the company’s announcement to donate 10% of profits from British Gas retail supply to an emergency fund to help customers pay their bills. This is a small change given that although Centrica reported adjusted operating profits of £1.3billion in the six months to June, British Gas retail supply profits amounted to £98 million. In terms of the scale of the energy crisis affecting homeowners, it’s like having a bake sale to fix the roof of a church, especially as on Friday another expected painful price cap increase will lead to a further dramatic increase in bills.

In the wholesale market, gas is once again on a seemingly unstoppable upward march, a dramatic move that will deepen the energy crisis. UK gas prices rose to levels not seen since March, while gas prices in Europe shot up like a rocket amid lingering supply fears, hitting new record highs. Plans are already in place to save energy, which darkens streets across Germany and makes public buildings colder, but much stricter measures may need to be enforced given dwindling gas supplies .

The gaping shortage of talent to fill the record level of vacancies in the UK has sent companies rushing to recruiter Hays plc (LON:HAS) for help. Annual operating profit jumped 128% to just over £210m for the year ending June 30, from £95.1m a year earlier. The fight for staff has been intense since the pandemic subsided, and although vacancies fell a bit in July, they are still very high and salaried employment is also at a record high. Investors expect the company to continue to make hay as long as the sun shines for now, but given the more worrisome clouds hanging over the UK economy, these ultra favorable conditions for the market of recruitment are likely to fade.

Article by Susannah Streeter, Senior Investment and Market Analyst, Hargreaves Lansdown

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