The UK’s FTSE 100 index continues its upward trend, reaching 10,822 points yesterday—its highest level on record. The index has risen by around 9% since the beginning of the year to date, outperforming other European equity indices such as France’s CAC 40, which also hit a record high yesterday with gains of about 5%, the Stoxx 600, which rose roughly 7% to a new all-time high, and Germany’s DAX, which is up around 3%. The FTSE 100 has also outperformed U.S. equity indices.
The strong performance of the FTSE 100 is driven by several factors, most notably the robust performance of the UK banking sector, led by HSBC. The bank’s fourth-quarter results exceeded market expectations in terms of both revenues and earnings, while its market capitalization surpassed GBP 200 billion for the first time in its history. HSBC shares have risen by around 12% since the start of the year.
In addition, the decline in the headline consumer price index on a year-on-year basis to 3.0%—in line with expectations but below the previous reading of 3.4%—has strengthened market expectations that the Bank of England will maintain an accommodative monetary policy stance or cut interest rates twice during the current year, providing further support to the index.
Several UK economic indicators also came in stronger than expected. The UK budget recorded a surplus in January, with revenues exceeding expenditures by GBP 30.4 billion, while the fiscal deficit narrowed to GBP 112 billion. The services’ PMI rose to 53.9 points, above expectations of 53.5, while the manufacturing PMI climbed to 52.0 points, exceeding both expectations and the previous reading. Retail sales also increased on a monthly basis by 1.8%, well above expectations of 0.2% and the prior reading of 0.4%.
Moreover, foreign investor inflows into UK equities—benefiting from more attractive valuations compared with U.S. indices such as the S&P 500—have provided additional support to the market.
From a technical perspective, indicators continue to support further upside in the FTSE 100. The 20-, 50-, and 200-day moving averages are well aligned in a clear upward trend, with the 20-day average above the 50-day, and the 50-day above the 200-day.
The Relative Strength Index currently stands at around 74 points, placing the index in overbought territory and indicating strong positive momentum. The MACD also shows a bullish crossover between the MACD line and the signal line, reinforcing the outlook for continued positive momentum.
In addition, the positive directional movement index is near 30 points, compared with around 5 points for the negative directional movement index, reflecting a wide gap that signals strong buying pressure. Most importantly, the trend strength indicator stands at approximately 54 points, confirming that the upward trend remains strong and sustainable.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
