FTSE 100 plays catch up with US stocks on commodity strength

The FTSE 100 was playing catch up with major US indices on Thursday after another weak session over the pond was met by strength in London.

The FTSE 100 was 0.2% higher at the time of writing after the S&P 500 closed in the red for a second day.

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London’s weighting towards banks and commodities – and lack of tech – meant it has underperformed the S&P 500, Dow Jones and NASDAQ consistently over the past two years.

However, with interest rate concerns starting to creep back in, US stocks are feeling the pinch as commodity prices rise helping support teh FTSE 100.

“Stickier inflation and a reimagining of the Federal Reserve’s interest rate timelines, together with relatively soft earnings so far this season, means investors have struggled to get too excited across the pond,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“This of course comes after five months of very strong gains, so an element of breathing room was to be expected at some point – the question now,of course, is whether this is a pause or a more protracted reaction. The UK market, on the other hand, is being lifted by mining stocks amid higher commodity prices. Iran and Israel tensions are also slightly less heightened than they have been, which should inject some relief into trading.”

Airlines rally

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easyJet and IAG were among the top risers with gains of 2.2% and 3.9%, respectively, after strong results from peer United Airlines propelled the stocks higher.

“Yesterday, US airlines enjoyed a tailwind from United Airlines beating expectations and saying business travel demand was picking up. Today, UK airlines have entered the same slipstream as EasyJet’s results get the thumbs-up and International Consolidated Airlines flies right behind.

easyJet was also higher after releasing upbeat first-half trading, revealing a sharp drop in losses.

“easyJet’s best-in-class approach to capacity planning and route discipline has allowed it to be one of the biggest beneficiaries of travel’s renaissance. The budget airline has also upped its capacity by around 8% to meet swelling demand. It’s clear the importance of travel isn’t petering out for consumers, and easyJet has grasped the nettle by backing its holidays business which has paid dividends,” said Lund-Yates.

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