Indices higher again but upward momentum may be slowing

Stock indices across Europe traded broadly higher on Tuesday yet again, with the FTSE 100 trading into positive territory for an eighth consecutive session, its best run of gains for nearly a year.

The UK index did however struggle to break above near-term resistance between 6040-6050, with weakness in heavyweight miners and banks putting a chain on gains. Gains for the greenback US dollar today and concerns over a Chinese interest-rate hike meant that the FTSE 100 lost a bit of its upward momentum. There is every chance that with the Bank of England and European Central Bank rates to come on Thursday, along with Friday’s traditional non-farm payrolls, investors may take profits off the table at current levels if the FTSE fails to break above 6050.

In the long term, traders need to see a consistent break above the year highs of 6105 and key resistance for the UK Index at 6117 to be convinced that this rally has longer legs.

Indeed, we have already seen investors reduce their position sizes in key miners after speculation in the Chinese press that there could be an interest-rate hike soon. Given the unpredictability of rate hikes in China of late, and the fact that most rate hikes have been met with a bearish reaction by the share prices of mining companies, today’s weakness in firms such as Rio Tinto and Xstrata is understandable. The sector lost 0.7% on the day as a result.

FTSE Mid Cap 250 hits new four-year high
Away from the headline grabbing FTSE 100 Index, we do have the FTSE 250 Mid Cap Index reaching levels not seen for over four years, with the Index trading as high as 12,166. Most of today’s gains have been turbo-charged by positive buyer demand for retail stocks such as SuperGroup, Mothercare and Dixon’s Retail, whose shares have all risen between 3.5% and 5% respectively. Sports fashion retailers Sports Direct and JD Sports were however the midcap top gainers, rallying over 8%. The retail sector traded higher on the day by 1.7%, hitting a new near four-week high in the process.

Tullow Oil leads after H1 expectations
Shares in oil firm Tullow Oil led the FTSE 100 Index higher on Tuesday after saying that it expected to post record revenues for the first half of the year. The firm expects to achieve this through high output from its Jubilee fields in Ghana. Investors have turned a blind eye to the fact that the firm has put back its production target for its Ghanaian fields by a month due to rig maintenance and have instead been cheering the expected record results by buying into the firm’s shares strongly today.