The FTSE 100 rallied on Wednesday to trade above a key resistance level that capped gains in January and potentially opens the way for further gains in the index.
The FTSE 100 traded above 7,630 on Wednesday having broken through the 7,619 mark that proved a bridge too far for London’s leading index in January.
Having pushed through 7,640, the FTSE 100 traded at the highest levels since the beginning of the pandemic in a broad rally which saw most sectors gain. Technical traders will now be looking for a consolidation in the 7,620-7,630 region for the FTSE 100 to form a base for the next higher.
Notwithstanding the favourable FTSE 100 price action, investors will also take confidence from the favourable macro picture and the composition of the index.
With a strong weighting towards commodity shares, the index is shaping up to benefit from a continued rally in commodity prices.
BP and Shell have recently reported strong revenue generation on higher oil prices and with many analysts predicted $100 per barrel prices in the short term, the stage is set for a move to the upside in the oil majors.
Couple this with surging metals prices and favourable conditions for the miners, the index is set to enjoy support in the short term.
GlaxoSmithKline
Although most sectors rose on Wednesday, there was a drag in the form of GlaxoSmithKline which dipped 2% after it announced earnings for the 2021 full year. GSK’s revenue grew on 5% on a constant currency basis, but it wasn’t enough to please investors who wanted a more solid strategic outlook given the potential sale of their consumer business.
“Our experts tell us the spotlight is focused on the consumer health spin-off, set to occur mid year, following news of Unilever’s three unsuccessful bids and reported Private Equity interest. The market eagerly awaits a more detailed strategy overview at GSK’s capital markets day in late February,” said Sebastian Skeet, Senior Analyst for healthcare sector clients at Third Bridge.