The FTSE 100 opened up higher on Friday, which was at odds with a sell-off in the US technology that saw investors rotate out of stocks such as Nvidia, Tesla and Meta into an array of sectors that have been overlooked in the recent rally.
The interest in more ‘traditional’ sectors helped spark a rally in European indices that aren’t dominated by technology companies and have a greater exposure to the wider economy.
“The tech-light FTSE 100 has opened higher, taking a cue from yesterday’s session in overseas markets,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“In a rare occurrence of late, the S&P 500 equal weight index, which is less focussed on the technology-dominated mega-caps, outperformed the headline S&P 500, climbing 1.1% while the latter fell 0.9%. Tesla fell 7.4%, giving up much of the gains seen so far this month, and Wall Street darling NVIDIA’s shares were down 5.6%. Given its staggering performance on all but the shortest time horizons, some profit-taking and indeed diversification is not unhealthy.”
There was a notable interest in cyclical FTSE 100 shares on Thursday, with Rightmove topping the leaderboard, followed closely by JD Sports.
The risk-on nature of trade on Friday was reinforced by the selling of defensive sectors such as utilities and precious metals stocks. United Utilities was the top faller, down 1.7%, while Severn Trent retraced some of yesterday’s gains.
Attention will be on the US session and whether AI-related stocks can bounce back from the sell-off overnight, and if buying in the across the rest of major indices continues.
Investors will also be mindful a string of UK data suggests the economy isn’t as weak as people first thought putting the chances of an interest rate cut next month at risk.
“Right now, a strong economy is a bit of a double-edged sword for MPC policymakers assessing which way they will jump come 1 August,” said AJ Bell head of financial analysis Danni Hewson.