The FTSE 100 fell on Friday as the UK’s leading index failed to continue a rally to the highest levels since the beginning of the pandemic.
Having closed at 7,384 on Thursday, the FTSE 100 was within touching distance of the key level of 7,403. However, the index fell on Friday with heavyweights including AstraZeneca, Shell and BP softening on Friday morning.
The FTSE 100 was trading at 7,349, down 34 points in mid-morning trade on Friday.
“The FTSE 100 is on the cusp of finally hitting its pre-pandemic levels, nearly two years after the global market crash of February 2020,” says Russ Mould, investment director at AJ Bell.
“This has been a long time coming and somewhat embarrassing for the UK’s market reputation because the Nasdaq Composite in the US managed to claw back all its Covid-related market losses in just a matter of months – by 2 June 2020 it was trading ahead of the pre-pandemic levels.”
“The magic number for the FTSE 100 to surpass is 7,403.92 which is the market closing price on Friday 21 February 2020. When the market opened the following Monday, it began a dramatic fall which saw the FTSE 100 slump 30% by 20 March 2020 to hit a post-covid trough of 5190.78.”
“While the rebound was initially impressive, by June the rally has lost its momentum and it wasn’t until the first Covid vaccines were announced last November that it started to motor again.”
“A key reason why the FTSE 100 has found it so hard to recover all the lost territory is the type of stocks that have the biggest influence on the index’s performance. The FTSE 100 is market-cap weighted so the largest companies really matter when it comes to how the index moves.”
AstraZeneca
AstraZeneca is one such FTSE 100 heavyweight and the largest share by market cap (£139 billion), making up a significant part of the index.
Astra shares were down some 4% early on Friday and by far the biggest drag on the index after the company released their Q3 update.
Astra saw revenue soar and said they would start to take profit from the vaccine, but margin pressures spooked investors.
“The acquisition of Alexion means Astra’s sales numbers have soared. But impairments, additional operating costs post acquisition, new drug launches and the fact the groups still makes no profit on vaccine sales all mean profit margins are down substantially,” said Nicholas Hyett, Equity Analyst at Hargreaves Lansdown.