FTSE 100 climbs for fourth straight session

<p>The FTSE 100 climbed for a fourth consecutive trading session on Thursday, with the UK Index boosted by gains in mining stocks after data from […]</p>

The FTSE 100 climbed for a fourth consecutive trading session on Thursday, with the UK Index boosted by gains in mining stocks after data from China helped to ease concerns over an aggressive slowdown in activity, for now.

The FTSE 100 closed higher by six points at 5921, tracking similar gains across broader European indices such as the DAX and CAC.

Most of the gains in the UK Index were in part down to higher demand for mining stocks, which bears a heavyweight influence on the FTSE 100.  Mining stocks such as Rio Tinto, BHP Billiton and Kazakhmys all saw decent gains of around 2% in trading today thanks to confidence boosting data out of China before the UK trading session began.

Chinese GDP cooled to 7.4% from 7.6% on an annual basis in the last quarter, in line with expectations, but at the same time industrial production rose stronger than expected at 9.2% whilst retail sales also beat forecasts to come in at 14.2% on an annual basis. The data helped to increase confidence that Chinese metal demand may not necessarily weaken as strongly as is currently feared. This ‘fear’ had been exacerbated of late by the profit warnings of US tech and construction bellwethers such as Caterpillar and Intel, whilst various downgrades on Chinese growth from Rio Tinto and BHP Billiton have also kept investor expectations fairly low. With today’s Chinese data roundly beating expectations, particularly on the industrial production side, this has played into the hands of bull enthusiasts and has convinced investors to buy into mining stocks.

Of course, there is a catch-22 situation with most Chinese data. Stronger than expected Chinese data lessens the pressure on the People’s Bank of China (PBOC) to act in terms of stimulus and rate cuts. Given that Central Bank policy, such as the Fed’s additional $40bn monthly purchases and the ECB’s Outright Monetary Transactions, have been used as an effective mental stop loss for investors buying into the market, and thereby boosting the FTSE’s near term bullish trend, many traders are still waiting on and expecting China to act too. Therefore, whilst today’s Chinese data is well taken, it needs to be taken with a pinch of stimulus salt.

Oil stocks have traded weakly today, keeping a leash on the FTSE’s charge as a result, with the FTSE 350 energy sector losing 0.35% and tracking weaker crude oil prices, where Nymex Crude oil fell over 1% in afternoon trading.

A look at the forex markets echoes a theme of euro profit taking, with the single currency losing 0.16% against the US dollar and 0.1% against the pound. The euro’s strength over the last week has been impressive, but the fragile currency has failed to break above resistance of $1.3170, which it needs to do before it can target $1.33 and $1.35.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.