FTSE 100 value, information and evaluation:
- The FTSE 100 index of main London-listed shares is in place to climb additional, helped by Wall Street power, risk-on sentiment within the markets, earnings optimism and information of an sudden drop in UK inflation.
- These components ought to outweigh persevering with market expectations of an imminent tightening of UK financial coverage and unhealthy Covid-19 knowledge.
London shares upside beckons
London’s FTSE 100 index is modestly decrease in early European buying and selling Wednesday but it surely’s turning into more and more clear that its development greater stays in place, partly as a result of power of Wall Avenue shares. The S&P 500 index closed in New York up 0.7% Tuesday, solely just under its document excessive.
As well as, “danger on” sentiment continues to profit property like shares and the most recent UK inflation data had been optimistic, exhibiting sudden declines in September. Earnings optimism could possibly be an element too.
UK Inflation knowledge
Supply: DailyFX calendar
On the draw back, the Financial institution of England continues to be anticipated to be one of many first main central banks to tighten financial coverage, with market pricing exhibiting only a 7.8% likelihood that UK Financial institution Charge will nonetheless be at 0.25% by September subsequent 12 months. Furthermore, the most recent UK Covid-19 figures present the figures are worsening.
Nonetheless, because the chart beneath reveals, the FTSE continues to development greater and stays inside shouting distance of its highest degree since February 2020, reached firstly of this week.
FTSE 100 Value Chart, Each day Timeframe (February 23 – October 20, 2021)
Supply: IG (You possibly can click on on it for a bigger picture)
Bullish sentiment knowledge
As for sentiment, IG consumer positioning knowledge are sending a bullish sign. IG’s retail dealer knowledge present 34.81% of merchants are net-long, with the ratio of merchants quick to lengthy at 1.87 to 1. The variety of merchants net-long is 6.39% decrease than yesterday and 22.16% decrease than final week, whereas the variety of merchants net-short is 1.92% greater than yesterday and 25.95% greater than final week.
Right here at DailyFX, we usually take a contrarian view to crowd sentiment, and the actual fact merchants are net-short suggests FTSE 100 costs might proceed to rise. Furthermore, traders are additional net-short than yesterday and final week, and the mixture of present sentiment and up to date adjustments offers us a stronger FTSE 100-bullish contrarian buying and selling bias.
— Written by Martin Essex, Analyst
Be happy to contact me on Twitter @MartinSEssex