The FTSE 100’s heavy weighting towards natural resources was evident on Thursday as London’s leading index was launched higher by mining stocks after JP Morgan analysts upgraded Rio Tinto and Anglo American.
The FTSE 100 was 1% higher at the time of writing, with Anglo-American surging 5.5% and Rio Tinto not far behind with a gain of 4.6%.
JP Morgan analysts upgraded both stocks to neutral from underweight, citing improvements in Chinese steel demand.
“China steel demand has proven more resilient as infrastructure demand offsets poor property sector demand and excess output is finding its way to the export market. With the iron ore market relatively more balanced medium term…we see the iron ore miners offering moderately more attractive valuations,” JPMorgan wrote in a note.
BP and Shell added a decent number of points to the index as oil prices continued to tick higher.
“The miners were doing the heavy lifting for the FTSE 100 on Thursday morning amid positive broker commentary on the sector,” says AJ Bell investment director Russ Mould.
Equities have had the path higher cleared by US CPI, which did little to increase fears about the Federal Reserve hiking rates at their next meeting.
“Inflation data from the US yesterday was mixed but there wasn’t anything in there to cause major alarm for either investors or the Federal Reserve, even if energy prices are starting to become a relevant inflationary pressure again,” said Mould.
Markets will learn of a raft of US economic data on Thursday with the potential to move markets and shift interest rate expectations.
US futures were pointing to a positive open.
ECB hikes rates
After natural resource companies drove Thursday morning’s trade, attention quickly shifted to the ECB and their rate decision. The ECB hiked rates by 25bps to 4%, and markets will now be fixated on whether they are finished with their hiking cycle.
The Bank of England and the Federal Reserve will meet next week to decide on rates.