FTSE sees sixth straight day of gains helped by strong ISM data

The FTSE 100 saw yet more gains on higher risk appetite from investors on Friday, helping the UK Index to enjoy its best run of gains since September 2010. US ISM manufacturing data, which came out much stronger than the market had expected, helped to maintain the FTSE’s bullish streak into the afternoon session, pushing the UK Index up 0.8% on the day.

The FTSE 100 has rallied 4.5% in the last six consecutive sessions. Undoubtedly this has been driven by the Greece situation, which has calmed fears of an immediate bankruptcy and encouraged higher appetite for risk. The rally seen in banking stocks this week has been very encouraging. The UK banking sector itself has traded back above resistance levels of 4300, led chiefly by two strong days of gains for Lloyds’ shares in response to the strategy review published yesterday. Indeed, were it not for Lloyds and other gains in UK banks today, the FTSE would have been largely flat on the day.

The rally in the Dollar Index is however something investors may want to keep an eye on for any turn in sentiment from ‘risk on’ mode to ‘risk off’, with the greenback currency a favoured defensive play for traders.

Miners have suffered somewhat today from some bouts of profit taking, with investors happy to cash in their near 9% sector gains over the last six sessions, having seen PMI fall to an 11-month low, heightening near term metal demand concerns.

The recent sharp fall in the price of gold too, which has fallen 4% and over $60 in the process this week, has also served to weaken gold miner Randgold Resources shares. The firm’s shares have seen a strong run of gains this week, tracking the UK Index higher, but with gold continuing to sell off, traders have used this as an excuse to lock in their gains.

US ISM manufacturing data surprises to the upside
US ISM manufacturing data positively surprised the market on Friday with a growth to 55.3 from 53.5 previously, when traders were expecting a fall to 51.8. The data is a big turnaround from last month’s reading, when US manufacturing slowed to its lowest level in nearly 18 months. This time around the data has surprised to the upside and helped to ease some of the market’s fears of a continued slowdown in US activity. Fed Chairman Ben Bernanke hinted recently that the slowdown in US activity, whilst concerning, was based on some temporary factors and certainly today’s ISM data helps to reinforce that sentiment, though more data will be required to 100% convince the market on this.”