The FTSE 100 index is firing on all cylinders as it continues soaring to a record high. The index, which tracks the biggest 100 companies in the UK, soared to a high of £8,335 on Wednesday, continuing a bull run that started in March 2020 when it tumbled to £4,900.
Bank of England’s decision aheadThe FTSE 100 index, popularly known as the Footsie, is jubilant as most of its constituent companies continue soaring.
Data shows that NatWest’s share price has soared by over 42% this year, making it the best-performing company in the index. It is followed by Rolls-Royce Holdings, whose stock is up by over 39.6%.
The other top-performing companies in the FTSE 100 index are Barclays, Anglo American, Antofagasta, and Intermediate Capital Partners. The other top names in the index are firms like BAE Systems, Beazley, and 3i Group.
These companies have done well because of their robust earnings and the long track record of undervaluation. There is also a possibility that more British companies will be acquired soon. Thoma Bravo is buying Darktrace while BHP has placed a bid for Anglo American.
The general view is that British companies are significantly undervalued compared to their American peers. Data shows that the FTSE has a PE multiple of about 15, which is lower than the S&P 500 index figure of 23.
The FTSE 100 index has soared as hopes that the Bank of England (BoE) will start cutting interest rates soon. The swap market shows that most investors expect it will slash rates in the summer now that inflation is falling.
That explains why this week’s BoE decision is important since the bank will provide more information about when the cuts will start.
Stock indices do well when there is hope that a central bank will start to cut interest rates. This explains why US equities have soared after the country published weak nonfarm payrolls, consumer confidence, and manufacturing data last week. The hope is that the Fed will deliver two cuts this year.
Most importantly, the composition of the FTSE index is also playing a role. It is mostly made up of companies that are doing well like banks and mining firms. A closer look shows that oil and gas and mining companies dominate the top-ten list of its biggest companies.
FTSE 100 index forecast
The daily chart reveals that the FTSE index has been in a strong bull run. It recently rose above the key resistance point at £8,045, its highest point in February. It has also remained constantly above the 50-day moving average.
At the same time, the Average Directional Index (ADX) has soared to over 30, signalling that it has a bullish momentum. Also, the bull and bear power indicator has remained above the neutral point while the Relative Strength Index (RSI) has moved above 70.
Therefore, the outlook for the index is bullish, with the next important target to watch being at £8,900. The index could retest the support at £8,050 in the short term.
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