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FTSE 100 set to jump again

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he FTSE 100 was set for a positive start to the session after yesterday’s bumper gains left some talking of a push towards 7000 territory.

The British index outperformed gains seen elsewhere, and was set for more gains on the opening today, with IG Index traders pricing in a 24 point rise to 6786.1.

CMC Markets has it even higher, up 34, with the Dax in Germany up 35 at 14,144 and France’s CAC 40 up 14 at 5800.

Investors were also encouraged by the rising optimism around the vaccination programme’s progress in holding down Covid cases, with talk now increasingly optimistic about lockdowns being eased.

Travel stocks gained yesterday, with the biggest risers including British Airways owner IAG and Whitbread, owner of the Premier Inn brand. Those stocks could pause for breath somewhat today but are likely to retain most of their gains.

CMC Markets analyst Michael Hewson said: “Having underperformed so much in recent weeks, the potential for a FTSE 100 retest of its January peaks and a move towards 7000 could well increase as long as we see a continuation of progress on vaccines and falling coronavirus infection rates.”

Asian trading overnight saw more gains for the Japanese Nikkei and Wall Street could be set for a bumper session as it plays catch up with other markets following its holiday yesterday.

The UK looks set to avoid a double dip recession, but European economies may not. The outlook will become clearer this morning as Eurozone GDP data for the fourth quarter come out. It’s expected that they will show a contraction of 0.7%, or 5.1% for 2020 as a whole.

Looking ahead, the German ZEW economic expectations index, also out today, is likely to slip back to 59.5 from 61.8 in January due to the slow rollout of vaccines there and what CMC’s Hewson calls a “stubbornly high” rate of hospitalisations and infections there.

Commodities prices may be set for more gains in future sessions after the Financial Times reported that China was considering limiting rare earth metals exports to the US so as to hobble its defence industry.

Rare earth minerals are vital for use in the F-35 fighter jet, yet China controls 80% of global supply. The reports today could see increases in smallcap players in the UK such as Rainbow Rare Earths and others. Rainbow has already surged from 3.3p to 15p since October, though.

On the oil front, JPMorgan and Goldman Sachs have both claimed the market is set for a new “supercycle” of price rises. The growing talk of gains pushed some to speculate crude could go back to $100 a barrel as fiscal stimulus aimed at combating the economic hit from Covid boosts demand just as supply has been crimped by underinvestment in new production.

JPMorgan oil and gas head Christyan Malek was quoted in the FT telling clients: “We could see oil overshoot towards, or even above, $100 a barrel.”

BHP’s UK shares should rise after the mining giant last night boomed due to hot demand for its iron ore. The company also announced a record dividend of $1.01 a share to underscore its confidence in the future.



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