The FTSE 100 index has been in a strong comeback recently after the Bank of England (BoE) hinted that it will start pivoting soon. It was trading at £7,283 on Tuesday, which was about 8.68% above the lowest level this year. This price is slightly below last week’s high of £7,385.
The UK has been a mess this year. In 2022, it has had three prime ministers – Boris Johnson, Liz Truss, and Rishi Sunak – while the sterling crashed to the lowest level since 1980s. In the same period, inflation has surged to the highest point in more than four decades while Brexit is still a thorn in the flesh. Analysts expect that the UK will have the slowest recovery in the G7.
Most importantly, UK companies have struggled this year as strikes in the biggest companies like BT and Royal Mail continue. However, amidst all these challenges, the FTSE 100 index has outperformed its global peers this year. It has dropped by less than 4% year-to-date while the Nasdaq 100, S&P 500, and Dow Jones have all plunged by double-digits.
The FTSE 100 index has also underperformed its European peers like the DAX index, CAC 40, and Stoxx 50 among others. This performance is mostly because of several companies in the index like BAE Systems, Pearson, Shell, BP, Homeserve, Imperial Brands, and British American Tobacco. All these companies have benefited from the ongoing reopening of the global economy.
Footsie has also done well because it has minimal exposure to the tech industry. Instead, its biggest constituent companies are in industries like mining that have done well in the past few months. On the other hand, the biggest constituent companies in the Nasdaq 100 and S&P 500 are tech firms like Apple, Microsoft, and Alphabet.
So, is the FTSE index a good buy? The FTSE 100 index has two main catalysts. First, it seems like Rishi Sunak has brought stability to the UK. Second, the weak British pound will likely lead to more acquisitions, especially from American companies. It is estimated that Private Equity firms have over $3.6 trillion in dry powder, which they can deploy soon.
The four-hour chart shows that the FTSE 100 index has been in a strong bullish trend. It rose above the important resistance at £7,100, which was the highest level on October 6. It has also risen above the standard pivot point and all moving averages. The price is above the ascending trendline.
Therefore, the FTSE index will likely continue rising as bulls target the next first resistance at £7,476. This price is along the first resistance level of the standard pivot point. A drop below the support at £7,200 will invalidate the bullish view.
This post was last modified on Nov 08, 2022, 07:06 GMT 07:06