By Patrick Munnelly, Market Strategist, Tickmill
On Tuesday, the FTSE 100 index has modesly rebounded from six-week lows trading just above the flatline on the session, primarily driven by gains within cyclical sectors that had previously experienced declines.
Despite this recovery, oil stocks saw a 0.4% decrease due to the downward movement in crude oil prices, which acted as a restraint on the overall gains of the FTSE 100 index. While the blue-chip index showed improvement, the broader European STOXX 600 index outperformed it by adding 0.8%.
FTSE 100 biggest movers
New data unveiled on Tuesday revealed a deceleration in sales growth for British supermarkets during August, primarily due to dampened demand caused by unusually wet weather. As a consequence, shares of both Marks and Spencer LON:MKS and Sainsbury LON:SBRY, experienced a decline of about 0.2% while Ocado LON:OCDO fell 1.9%. Notably, sports retailer JD Sports LON:JD. is at the bottom of the blue-chip index shedding just shy of 7%.
Weighing on the retail sector has been a significant and rapid increase in interest rates has created challenges for individual budgets, despite the fact that wages have been growing at a much faster rate than house prices over the past year. Data from mortgage lender Halifax indicates this trend. Halifax, a component of Lloyds Banking Group LON:LLOY, highlighted that the expense associated with a typical 25-year mortgage, featuring a fixed interest rate for the initial five years and a 25% down payment, now constitutes 35% of an average full-time salary. This marks an increase from the previous year’s figure of 30% and a substantial rise from the 23% recorded before the onset of the pandemic. The combination of rising interest rates and housing costs relative to income has impacted the affordability of housing for potential buyers. Despite the relatively faster growth of wages compared to housing prices, the increased financial burden associated with mortgage payments has created an obstacle for individual spending power.
On the positive side of a quiet summer tape sits Fresnillo LON:FRES positive 5.5%, while RS Group LON:RS1 has seen bargain hunters stepping in after a poor finish to last week gaining 4% on the session.
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