The British stock market has started 2023 with a vigor. Futures contracts on the UK's FTSE100 stock index (UK100) have already rallied 5% since the beginning of January and are heading toward all-time record highs at 7903 points.
Why is the UK100 so strong?
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Create account Try a demo Download mobile app Download mobile appEach stock market is characterized by something different. As for the U.S. stock market, yes its composition includes a nearly 26% share of technology companies (a share of the S&P500 index), which are highly sensitive to interest rate hikes (inverse correlation). In Europe, and the STOXX 600 index, the share is only 7%, and the market itself is dominated by financial and manufacturing companies. The UK is dominated by companies heavily dependent on the commodities market, which has been doing well recently, and according to Goldman Sachs bank, commodities have good prospects in 2023 (especially due to low inventories).
At the moment, the FTSE 100 index is trading at a 31% discount to the global equity market based on the 12-month forward P/E ratio. Source: Refinitiv/Danilo Masoni
It was the energy and mining sectors that drove the bullish momentum on the FTSE index in 2022. A mild winter in Europe and the opening of the key Chinese market are positive aspects at the moment, however, a technical perspective on chart analysis and broad uncertainty over central banks' monetary policies and the specter of recession may indicate an impending slowdown in bullish momentum. Chart of UK100 and copper contracts (COPPER, inverted). Source: xStation 5
