Blue chip companies in the United Kingdom have been demonstrating tremendous strength this week as the FTSE 100 index on London Stock Exchange’s main market has edged higher for a third day in a row.
Following the same upward trend as the GBP against its peers, indices are treading a pattern of bullish markets in London versus far less confidence across the Eurozone.
The FTSE 100 index which consists of the 100 most highly capitalized of London’s publicly listed giants edged another 0.1% higher at the opening bell this morning on the trading floor at Paternoster Square.
This amounts to a 10 point gain over yesterday’s close, with the FTSE 100 now standing at a lofty 7,349 sending a clear signal that investors and stock market traders on London’s markets have quashed their fears that the reports on Omicron which surfaced 10 days ago as business has carried on uninterrupted across Britain.
Conversely, Europe’s main indices have taken a downward turn, with Germany’s DAX index down a considerable 73 points to 15,740, which is a 0.46% drop, while France’s CAC index is down 8 points this morning which amounts to 0.1% and stands at 7,055 whilst Italy’s FTSE MiB has dropped 181 points, or 0.67%, to 26,955.
This shows the clear distinction between traders and investors who have confidence in the continued operation of British big business and the wider economy which means that consumer activity remains at a normal level and has not been curtailed by any restrictions which had initially been anticipated at the end of November when the news channels began covering data related to Omicron in vast sections of their media and daily news schedule.
The heat is off the travel and entertainment companies for the moment, some of which are included within the FTSE 100 index, and with residents of the United Kingdom having resumed their travel and social plans, many have bounced back from the dire straits that they were in during 2020.
Meanwhile, restrictions on movement, socializing and businesses across the Eurozone have led to the cautious approach by investors and traders on Europe’s main exchanges.
Interestingly, whilst the upward movements displayed by the performance of the FTSE 100 exchange have been across the board, it has been mining companies that have led the rebound, with companies including Glencore, Anglo-American and BHP leading the FTSE as copper imports to China hit their highest level since March and iron ore imports hit an 18-month high.
Therefore, with China and most of South East Asia being the world’s most industrious and highly populous regions where lockdowns and restrictions are non-existent, it leaves large raw materials companies with an unrestricted workforce to work full scale to be able to deliver products to trade partners – those being North America, India and the Far East.
The FTSE 100’s performance is reflected by American indices, with the S&P500 surging 3%, which puts it almost back to pre-omicron levels. Given that President Biden has already alluded to the possibility of some restrictions being invoked, this has not happened yet. Travel is unrestricted and business is continuing as usual across the United States, however should some restrictions return, there are some states, Texas and Florida being two of them, that will not invoke any restrictions at all and have guaranteed their residents total economic and personal freedom.
These are populous states which are home to many large big-cap listed companies, therefore any restrictions that may come in are unlikely to affect the entire nation’s economy as they are doing in European countries.
There is a clear division in investor confidence currently, which shows a favorable approach toward blue-chip indices in unrestricted nations compared to those in nations with restrictions.
With UK prime minister Boris Johnson set to make an announcement this afternoon on any potential curbs, there could be some volatility but given the current approach by many UK citizens and businesses, it is not likely to have anywhere near the impact the previous rounds of restrictions have had.
Either way, a return to market buoyancy for major indices should be of great interest to retail and professional traders alike.