- The FTSE 100 Index has followed the cue as confidence returns to equities markets following US-EU trade talks amid British economic recovery.
The FTSE 100 Index (INDEXFTSE: UKX) returned from the Bank Holiday to an upbeat start, driven by the US-EU trade deal. The Index was up by 0.7% in the opening hour of trade, recovering from Friday’s decline of 0.15%. Notable large cap stock gainers at the time of writing included IAG (+3.6%), Rolls Royce(+2.6%), GlaxoSmithKline (+1.4%) and BAE Systems (+1.8%). The Index’s top three largest stocks, AstraZeneca (LSE:AZN), HSBC (LSE: HSBA) and Shell (LSE:SHEL) were up by 1.07%, 0.10% and 1.22% respectively.
A de-escalation of the trade tariff war between the US and EU frees up about $1 trillion worth of goods from a harsh business climate and boosts investor confidence in equities markets beyond the two territories. The FTSE 100 Index has gained about 16% from its April lows and its Relative Strength Index (RSI) reading of 64 affirms the bullish momentum which will likely keep action on the ascending trajectory in the near-term.
Investors are also encouraged by recent economic data that showed the UK’s economy grew by 0.7% in the first quarter, exceeding the forecast estimate figure of 0.1%. In addition, Retail Sales grew by 1.2% in April, beating economists’ forecast figure of 0.2%. Also, the Bank of England is expected to continue with its monetary policy easing in the second half of the year. However, it will be careful to diffuse the inflationary pressure that drove the CPI to 3.5% last month.
FTSE 100 Index Prediction
FTSE 100 Index pivots at 8,770 points and action above that level signals control by the buyers. It will likely encounter the first resistance at 8,834 points, but a continued control by the buyers will break above that level and take the action higher to test the second barrier at 8,898.
On the other hand, going below 8,770 will signal control by the sellers. That will likely see the Index find initial support at 7,706 points. Breaking below that level will invalidate the upside narrative, and a stronger downward momentum could extend the decline to test 8,633.
UK Shifts Focus to Short-Term Debt to Cut Borrowing Costs
The UK government is actually more reliant on short-term borrowing to cut down on its growing and unsustainable interest bill, revealed the Financial Times. As the entire national debt of the country has an average maturity of 14 years, which is quite a long period, the new gilt issues to be released between July and September are only going to have an average life of nine years — the lowest to date (RBC Capital Markets). It is convenient to opt for short-term debt because it is cheaper, and the latter has been the choice of the Treasury, which is struggling with tight finances. However, it is a risky approach, because the latter also brings about an increase in the uncertainty in the interest rate. Jessica Pulay from the UK Debt Management Office certified that there has been a significant turning point this year with a shift from the issuance of long-term to the issuing of short-dated t-bills.
FTSE 100 Hits 3-Week High as Tariff Reprieve Sparks Broad Market Rally
The FTSE 100 jumped by 0.9% to the level not seen since May 5 on the back of the indeed positive news on U.S. President Trump's decision to postpone the EU tariffs. Meantime, the performance of the FTSE 250 went up by 1.2% in its first session after the bank holiday. At that time, stocks were sliding on the last weekday after Trump made the initial tariff threat. The news of the deadline extension till July 9 prompted the jump of the markets that hence destroyed the negative impact of the previous day. Aerospace and defense companies’ shares showed the best performance as Melrose Industries and BAE Systems rallied by more than 3% on the back of renewed Russia sanctions rumors. Elementis went up by 11.2% due to the sales of its talc unit with a value of $121M, while Jupiter Fund Management was up by 9.5% after the analyst upgrade. After the new rating from Barclays, Burberry followed suit by rising 3%. But those companies who got the short end of the stick were precious metal miners because of a 3.7% drop in their stock along with a reduction in gold prices. The next key events for the investors will be Nvidia’s earnings, U.S. Fed speeches, and initial PCE data on Friday.
Citi Warns of Rising Bearish Flows Amid Trade and Fiscal Policy Fears
According to Citigroup, global investor sentiment has shifted as the previous bearish flows have resumed, fronted by bearishness across U.S. indices, specifically the Nasdaq and Russell 2000. U.S. equity positioning remains net long, even with systemic downturns. The sentiment in Europe remains neutral, with the FTSE reflecting it, while Asia shows mixed signals - bullish signals in China and Hong Kong with bearish signals coming out of Japan and South Korea. Citi is quick to point out that caution is building across markets as macro contentions intensify.
FTSE 100 Rallies as Trump Eases Tariff Threats – Market Opens Strong
The FTSE 100 surged by 84 points to 8,801, gaining 1% in early Tuesday trading as markets reacted positively to Trump delaying EU tariffs. Intermediate Capital, Melrose, and Schroders led the gains, while gold miners fell. Meanwhile, M&C Saatchi acquired a UAE sports agency, Elementis sold its talc business for $55M, and Whitbread chair Adam Crozier announced his September departure.