The defensive nature of the FTSE 100 was evident on Wednesday as the index gained for a second straight day, despite volatility in US markets.
Most FTSE 100 constituents were positive at the time of writing with the index gaining 0.5% to 7,592.
“The FTSE 100 shrugged off a sell-off in US tech stocks overnight to trade a smidge higher on Wednesday morning in the latest reminder of the big differences between the UK’s flagship index and its counterparts across the Atlantic,” said AJ Bell investment director Russ Mould.
“The resilience of the FTSE 100 was impressive given it was able to withstand material falls for index heavyweights BP and Shell on lower oil prices. Investors are increasingly concerned about the current Covid situation in China where a relaxation of restrictions is leading to a surge in cases.”
“Thanks to less effective vaccines and a population with much less natural immunity, China is some way behind the West in its recovery from the pandemic and this has implications for global growth and global supply chains.”
Investor Repositioning
The specific concerns around China were evident in the FTSE 100’s miners on Wednesday with Anglo America, Rio Tinto, Antofagasta and Glencore all trading negatively.
It is notable for the commodity-dominated FTSE 100 index to rise when most of the commodity shares were down on the day.
This suggests some repositioning from the commodity sector to more UK-focused domestic stocks. The index was supported by mining companies late last year as investors bought into the sector ahead of a Chinese reopening.
Now China that has eased most COVID restrictions, this trade is being faded and investors are seeking out value in consumer companies and UK-focused equities.
Ocado was the top gainer, up 8%, while Sainsburys and B&M European Value were both up over 5%.
Construction companies and the housebuilders were also gaining bargain hunter interest despite a downbeat property outlook for 2023.