FTSE 100 continues rally as geopolitical concerns ease, earnings eyed

Enthusiasm for UK stocks continued Tuesday as London’s leading index extended its record-breaking streak into a second day.

Easing geopolitical tensions is helping find buyers for cyclical sectors as investor concerns about higher oil prices and their impact on inflation subside. 

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“The FTSE 100 has spring in its step at the start of the week, amid an easing of geopolitical tensions. The pulse of positivity comes in the absence of fresh retaliatory attacks by Israel or Iran and the US flexing its funding muscle and passing a crucial aid package for Ukraine,” explained Hargreaves Lansdown’s Susannah Streeter

Higher oil prices were the main protagonist in a global equity sell-off last week, and its retreat will combat fears about the timing and frequency of interest cuts.

After setting a new record high of 8,023 yesterday, the FTSE 100 was trading 0.5% higher at 8,063 at the time of writing.

Corporate earnings 

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Investors will be looking forward to a busy week for corporate earnings. Lloyds will kick off FTSE 100 banking updates in the UK, while many of the US ‘magnificent 7’ technology shares will report this week.

“The focus is switching to earnings season kicking off, and tech giants have a lot to prove as concerns grow about the era of high interest rates continuing. With the S&P 500 dipping below the psychologically important 5,000 mark, some negative sentiment continues to bubble,” Streeter said.

Tesla is first up this evening, although the EV maker has done nothing to justify the ‘magnificent’ label in 2024.

AB Foods was the standout FTSE 100 performer after the Primark owner said group profits jumped 39% on strength in the retail outlet and the food business. AB Food shares were 9% higher at the time of writing. 

“After a strong trading update in January, Primark-owner Associated British Foods has built on this momentum with its first-half results,” says Russ Mould, investment director at AJ Bell.

“It delivered an impressive set of numbers with strength across all areas of the business, including the less-heralded food and ingredients arm. The performance of Primark was particularly stunning, suggesting its value offering in clothing is resonating with cost-conscious consumers.”

Taylor Wimpey was among the best performers after releasing a trading statement highlighting steady performance in the first months of 2024. Sales rates and the order book were pretty much in line with last year, representing a stabilisation in activity.

“Despite the UK housing market sitting on uncertain ground, Taylor Wimpey’s made a solid start to 2024 with the Spring selling season progressing as expected,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“Affordability pressures remain a key issue to wrestle with, but the group called out good mortgage availability and sustained consumer confidence as tailwinds supporting firm levels of buyer interest. Tough trading conditions in 2023 saw revenue and profits fall significantly.”

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