Ritika Janiya
The FTSE 100 is set to outperform Wall Street this week if global stock markets turn negative. Despite the recent decline, the UK’s premier stock index could end the week in positive territory due to its immunity to market mayhem. US tech stocks will see major falls.
The UK’s leading share index, the FTSE 100, is on the way to beat Wall Street for the week amid a global sell-off of shares starting last Friday. According to JP Morgan, the FTSE 100 may eventually end higher than the badly hit US stock markets.
To begin with, one of the reasons why the FTSE 100 has fallen of late is a bit of weakness in the US that began the day down as much as 3.2% over concern of a US recession. In any event, it has begun to stage a recovery, showing an increase of 0.2% Thursday. This is in the sharp contrast of what is happening in the US where the most big techs were mowed down by heavy declines; for instance, on the opening of trading Thursday, the Dow Jones, S&P 500, and Nasdaq were seen to be down.
Another key index in the United Kingdom, the FTSE 250, is now adding 0.4% on Tuesday; however, it is still expected to finish the week with a loss of 1.1%. This is away from the steep drops of last week, moving deeper into the territory of losses, at 4.2%. This seemed to be reflective of the fact that recent conditions have still been pretty tough in the UK general market.
Mislav Matejka, the JP Morgan strategist, said to the effect that the UK market is most of the time a good place to invest during tough times. As he phrases it, “‘The UK has traditionally been a low beta, defensive market, which performs well on a relative basis during downturns.” Literally, that means the UK market falls less when the global stock market goes down; it is one of the safer places to invest.
What is more, European shares have gained back almost all the losses suffered in the recent global stock sell-off. This followed speculation that the Federal Reserve, the US central bank, might cut interest rates soon. Lower interest rates make it cheaper to borrow and therefore boost stock markets.
“We rarely get to say the UK’s been a benefactor of its low-tech exposure, but that’s certainly been the case this week.” According to Matt Britzman, a senior equity analyst at Hargreaves Lansdown, due to the fact that the UK stock market does not hold much of its weight in the technology companies that have been whipped about recently, it moved in better ways.
Here are some other updates in markets worldwide:
- Investors Bet on Falling Dollar: Many traders now believe that the US dollar will drop soon. Nearly 23 percent of investors think the dollar is going to fall, up from just 8 percent last month. This change in opinion is based on expectations that the Federal Reserve will be cutting interest rates soon. A weaker dollar could mean less profit for investors who hold dollars.
- Global Shares Climb: Global stock markets have begun to rebound after a bruising week. The MSCI All Country stock index, which follows shares from around the globe, climbed 0.4%. The Dow Jones, S&P 500, and Nasdaq in the U.S. also rose slightly in major equity indexes. The bounce materialized after officials at the Federal Reserve suggested they might cut interest rates later this year to support the stock market.
- New UK-US Sanctions on Belarus: The UK and the US have imposed new sanctions on Belarus. These sanctions are against individuals and entities in Belarus said by the West to be involved in human rights abuses and in supporting Russia’s actions in Ukraine. The UK has sanctioned a range of military officials and companies, while the US targeted people and enterprises close to Belarusian President Alexander Lukashenko.
- China’s Rich List Changes: Colin Huang, the founder of Pinduoduo, is currently China’s richest man after overtaking Zhong Shanshan, the tycoon behind Nongfu Spring bottled water. Thanks to an increase triggered by international markets, Huang’s wealth surged to $48.6 billion in the value of the shares in his company. For the first time in more than three years, the rich list in China is topped by a technology executive.
- Market Predictions: Traders are now pricing in a 40% chance of an interest rate cut by the Bank of England in September after the shaky month-ahead start. In the US, there is a sense that maybe a rate cut is due from the Federal Reserve—the first in five years.
SW: In Nutshell while the FTSE 100 will remain better placed than Wall Street in the current market turbulence, early signs of revival seem to be building up in global equity markets. The reason why FTSE has shown more resistance compared to other markets is that it has had far less exposure to technology stocks. But various global financial happenings like investors’ mood change and fresh sanctions seem to influence the market condition.
