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Fast query:
As of this weekend, which (if any) of those main indices had been buying and selling larger up to now this yr?
- (US)
- (US)
- (US)
- (US)
- (Germany)
- (France)
- (UK)
- (Europe)
- (Spain)
- (Italy)
- (Japan)
- (Japan)
- S&P (Australia)
- (Hong Kong)
- (South Korea)
The reply?
Solely the UK’s FTSE 100, although as of yesterday’s intraday drop, the index was buying and selling inside a pair dozen factors of its 2021 shut close to 7400 earlier than transferring larger. Regardless, the outperformance of UK equities is extremely notable and spectacular in opposition to a backdrop of geopolitical battle, surging costs, and rising rates of interest.
What’s driving the relative energy in UK shares?
The only clarification for the energy within the UK inventory market is that the development of the FTSE index options comparatively excessive allocations to the sorts of shares which have gotten off to a powerful begin this yr. From an industry-level perspective, the very best performing sectors this yr have been vitality (9.5% weight within the FTSE as of December 31 2021), financials (17.8%), and shopper staples (17.9%); in different phrases, practically 50% of the index is within the three strongest sectors up to now this yr!
On the similar time, the index options comparatively low allocations to the worst-performing sectors year-to-date, together with shopper discretionary (6.9% weight), communication providers (4.3%) and expertise (1.4%) shares. In different phrases, after years of trailing different international indices on account of its heavy allocation to underperforming vitality and monetary shares and underweight place within the sturdy expertise and communication sectors, the present market setting has been a close to “good storm” state of affairs for the varieties of shares within the FTSE index holds.
The place is the FTSE 100 headed from right here?
My colleague Fiona Cincotta lined off the important thing short-term ranges to look at on the UK’s benchmark index in her “Two trades to look at” article yesterday, noting that “A break under [7400] and the 100 sma at 7370 might open the door to 7250 Friday’s low, forward of 7185 the 2022 low. A break under this stage can be important as it might create a decrease low.”
If we do see the index succumb to the broader threat averse setting, the convergence of the 200-day EMA and rising pattern line within the within the 7200 zone might be important. The FTSE has already bounced off these converging help ranges 4 instances within the final 13 months, and notably, the index hasn’t see a detailed under its 200-day EMA since November 2020, so a break under that stage would mark a considerable change within the longer-term uptrend.
Supply: TradingView, StoneX
In the meantime, if we see headlines out of Ukraine enhance and threat urge for food return, the FTSE could also be well-poised to increase its year-to-date outperformance with a fast restoration to its post-COVID highs close to 7700. Typically, the property that outperform in a market correction are those that the paved the way larger when the correction ends!
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