The FTSE 100 was flat on Friday as the market digested a week of corporate updates and news the UK economy had reached pre-pandemic levels.

UK GDP rose 0.9% in November meaning the economy had completed its recovery to levels of activity saw before the pandemic. However, it must be noted these figures were taken before the impact of Omicron fully took hold in December, which is likely to see a reduction in activity.

“It’s taken 20 volatile months for the UK economy to finally clamber back up to where it had been before Covid wrought its damage.  The speed of growth has caught many by surprise considering the lacklustre figures delivered the previous month, although October’s number have been revised upwards to 0.2%,’ said Danni Hewson, AJ Bell financial analyst.

Although London’s leading index is comprised of companies that largely earn revenue’s from overseas, we may learn in the coming weeks the strength in the UK economy is being replicated in other major global economies.

After a strong start to 2022, analysts remain positive on FTSE 100 shares, suggesting we could see the rally extend further as we progress through the year.

“As we enter 2022, 57% of all analysts’ recommendations are buys and just 9% are sells for constituents of the FTSE 100, the highest and lowest scores over the past eight years. For the FTSE 350 index 59% of all recommendations are positive ratings and just 8% negative ones, so even after last year’s healthy share price gains the analysts are more bullish than ever,” says AJ Bell Investment Director Russ Mould. 

“Momentum players may feel inclined to go with the positive flow. Contrarians may take the opposite view as they bear in mind legendary investor Sir John Templeton’s maxim that ‘bull markets are founded on pessimism, grow on scepticism, mature on optimism and die on euphoria.’

The FTSE 100 was trading at 7,560 in early trade on Friday. At this level the FTSE 100 index has added roughly 1% to its value on the week.

BP and Standard Chartered were the strongest weekly gainer, both adding close to 7.5%.

Helped by stronger oil prices, BP has been a significant contributor to the FTSE 100’s gains due to its large weighting in the index.

Banking shares HSBC, Barclays and Lloyds also posted respectable increases during a week anticipation grew around further increases to global interest rates.

TPG shares jumped almost 12% yesterday on the US Private equity giant’s first day of trading.

The group valuation surged to $10bn. It’s the biggest floatation in the US so far this year. TPG has almost $109 billion in assets and has investments in AirBnb, Spotify and many other companies.

 “We will continue to build on the business in the way we have historically – organic growth, seeing opportunities and building into it,” said CEO Jon Winkelried.

“Our experience has been that if you choose the right company in the right sectors, they will grow through the market perturbations that you see at times like these.” 

The group was founded by David Bonderman and Jim Coulter.

Nickel shares are set to enjoy the benefits of increased demand for their metals as the world moves to increase the adoption of Electric Vehicles (EVs).

The anticipated exponential growth in demand for EVs in the coming years will require a significant ramping up in the production of the metals essential for their manufacture.

Electric vehicles require huge amounts of cobalt, copper, lithium and nickel and demand for these metals has ticked higher inline with EV manufacturing.

Minerals used in EV, according to the International Energy Agency:

-Copper: 53.2kg

-Lithium: 8.9kg

-Nickel: 39.kg

-Manganese: 24.5kg

-Cobalt: 13.3kg

-Graphite: 66.3kg

The surging demand for these metals is most recently evident in the nickel price, which has recently hit the highest level since 2011 on the London Metal Exchange.

Nickel prices traded above $22,000 per tonne on the London Metals Exchange this week, having sunk to lows around $11,000 in March 2020.

The increasing nickel price is of course good news for nickel mining shares and could make them one of the foremost beneficiaries of the EV boom.

Nickel shares

BHP Group (LON:BHP)

BHP is a highly diversified miner with global operations that produce copper, iron ore, potash and nickel.

BHP posted a 69% increase in underlying EBITDA to $37.4bn in 2021 on revenue of $60.8bn.

Nickel accounted for £1.5bn of this revenue in the period from their Nickel West asset in Australia.

Although BHP provides a relatively small exposure to nickel compared to their diversified production of base metals and fossil fuels, they have included nickel – along with copper and potash – as commodities they want to increase their exposure to.

In their 2021 results, BHP outlined forecasts of metal demand over the next 30 years as the world decarbonises to reach climate change targets.

BHP’s forecasts predict nickel demand will increase nearly 400% in a scenario where 1.5 degree targets are met.

Highlighting the importance the group places on nickel, BHP have recently announced a $100m investment into Tanzanian UK private entity, Kabanga Nickel.

Although BHP offers a marginal exposure to nickel currently, it has plans to ramp their nickel exposure up, and the FTSE 100 stock provides safety through their diversified portfolio of assets and attractive dividend yield.

Horizonte Minerals (LON:HZM)

Horizonte Minerals is dual-listed on the TSX and London’s AIM and operates the Araguaia and Vermelho nickel projects in Brazil.

The company has conducted feasibility studies on the Araguaia projects and is working towards construction of a mine that could produce up to 29,000 of nickel per annum.

Horizonte’s Vermelho nickel cobalt project is being developed specifically to service the needs of the electric vehicle market and is currently undergoing feasibility studies.

In a tweet from the Horizonte Minerals account on 13th January, they said “At US$22,000/t #nickel Araguaia’s Stage 1 + Stage 2 NPV is US$2.23 billion.”

Their lack of revenues means investors are at risk of dilution should the company need to raise further funds in addition to funding packages already outlined by Horizonte. However, adventurous investors may stomach this risk given the firm has recently completed a £147m fundraise and the NPVs of their projects dwarf the current £245m market cap.

Horizonte Minerals is the purest play on nickel of the three nickel shares we have included.

Technology Minerals (LON:TM1)

Technology Minerals have recently floated on the London Stock Exchange and provide exposure to all battery metals, including nickel.

Having raised approximately £5 million through their IPO, Technology Minerals plan to create a circular economy for battery metals in one group. This will involve the mining of battery metals through multiple projects and recycling of the metals through Recyclus Group. Technology Minerals has a 49% stake in Recyclus Group.

Technology Minerals is at the very early stages of establishing their operations but has commissioned a Competent Persons Report (CPR) for their project in Cameroon and has applied for exploration permits.

The CPR found three of five permits are considered prospective for nickel-cobalt-manganese mineralization.

The report makes similarities to the Nkamouna in southeastern Cameroon operated by Geovic Mining Corp where 120.6 Mt @ 0.65% Ni, 0.23% Co and 1.35% Mn has been identified.

Technology Minerals’ nickel journey is just beginning and may face bumps in the road, however, the overall business model will interest those looking for exposure to the EV and clean energy market, when compared to other nickel shares.

The FTSE 100 traded sideways on Thursday as London’s leading index consolidated recent gains above the key psychological support level of 7,500.

The 7,500 mark provided a stiff point of resistance in the early trading days of 2022 but has convincingly broke through to trade at pre-pandemic highs.

Technical analysts will now be watching the FTSE 100 and a test of 7,500 to judge whether the index can build a base there for the next leg higher. The FTSE 100 was trading at 7,546 at midday in London.

FTSE 100 corporate updates

The FTSE 100 traded sideways as the market digested a number of corporate updates including Tesco’s festive trading update and and an instalment from Persimmon.

Persimmon shares were knocked down 1.7% after it missed some analyst estimates as completions were pushed back due to Omicron.

“With approaching 300 sites in operation, Persimmon have a lot of moving parts. Some analysts expected turnover to be a shade higher, but then again, the big jump in forward bookings, up from £1.32bn to £1.62bn suggests that demand is fine and most likely, some completions slipped over the year end as Omicron raced through workforces up and down the country,” said Clayton, fund manager at HL Select.

“Having stepped up land purchases, Persimmon should be able to capitalise on demand, so long as they can get the planning system to work for them. With sales rates up 20% in the second half the company is well positioned for the new year.”

Following a fairly respectable update from Sainsbury’s yesterday in which they upped their profit guidance, helping shares rise on the day, investors showed some disappointment with Tesco as shares gave up 1.5% in Thursday morning trade.

“Despite a strong Christmas and a small upgrade to forecasts, Tesco didn’t do enough to impress the markets, at least in early trading on Thursday,” said AJ Bell investment director Russ Mould.

“However, there was still plenty to please long-term investors. The more focused strategy progressed under Dave Lewis and his successor Ken Murphy has helped deliver the supermarket’s highest market share in four years.”

“Tesco’s online sales continue to track much higher than pre-pandemic levels. This is important as the greater scale in this part of the business is improving its profitability.”