Markets Rally Amid AI Optimism, UK Rate Cut Speculation, and Global Economic Uncertainty:

Image Source : Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went up around 1.51% on 06 February 2025.  

Macro Update:  The Bank of England is expected to cut interest rates for the third time since 2020 as it navigates a sluggish economy and persistent inflationary pressures. Economic growth has remained weak since mid-2024, weighed down by concerns over Finance Minister Rachel Reeves' tax hikes for employers, a potential global trade war led by U.S. President Donald Trump, and rising costs. Meanwhile, UK markets saw a rebound, with the FTSE 100 gaining 0.6% and the mid-cap FTSE 250 rising 0.5%, supported by strong performances in key sectors. Pharmaceutical giant GSK surged 7.6% after announcing a £2 billion share buyback and raising its long-term sales target to nearly $50 billion, while gold miners jumped 3.6% as gold prices hit record highs. Fresnillo climbed 5.8% after being named J.P. Morgan’s “top pick. 

Top Market Movers: Among top gainers on FTSE 100 index, Anglo American PLC (LSE: AAL) witnessed a rise of 6.65% followed by AstraZeneca PLC (LSE: AZN) which gained around 5.68%. 

Commodity Update: The U.S. dollar fell to an eight-week low against the yen and hovered near a one-month low against the pound as investor fears about a global trade war subsided. Japan's yen gained momentum, supported by rising expectations of further interest rate hikes by the Bank of Japan following strong wage data and a central bank official’s comment. In commodities, gold dropped 0.19% to $2,888.20, silver fell 0.61% to $32.77, while copper rose 0.75% to $9,335.20. Brent crude rose 0.19% to $74.55, recovering from a previous sell-off after Saudi Arabia raised March oil prices significantly. Investors await U.S. Non-Farm Payroll data for clearer insights on future rate decision. 

Our Stance: U.S. stock markets closed higher on Wednesday, rebounding from earlier declines as investors remained optimistic about potential interest rate cuts despite disappointing earnings from Alphabet. The Google parent dropped 7.3% after reporting slower cloud revenue growth and announcing a $75 billion investment in AI, raising concerns over profitability. Meanwhile, President Trump’s proposal for the U.S. to take control of Gaza and relocate Palestinians faced widespread global condemnation, with strong rebukes from Germany, China, Saudi Arabia, and Russia, warning it could fuel further instability and conflict. President Trump's threats of new tariffs on foreign goods have already contributed to market volatility this year. While investor confidence in AI remains strong, concerns over geopolitical tensions and economic policies continue to weigh on global market sentiment. 

FTSE 100 

The FTSE 100 finished at 8,623.29 on Wednesday, rising by 0.61%, and formed a bullish candlestick pattern, signalling positive market sentiment. The index remains above its 21-period Simple Moving Average (SMA), suggesting a favourable short-term outlook. Furthermore, the 50-period SMA provides solid support, reinforcing the potential for continued upward momentum. With the Relative Strength Index (RSI) at 65.25, the index shows healthy bullish strength without reaching overbought levels, indicating there is still room for further gains. These technical indicators indicate a positive trend, suggesting that the FTSE 100 is poised for further growth. As such, the index remains an appealing option for short-term investors seeking potential opportunities. On the weekly chart, the FTSE 100 gained 2.02%, closing at 8,673.96. The index remains well above the 50-period SMA at 8,186.40, with support at 8,277. Resistance is at 8,700, and a breakout above this level could push the index toward 8,800. However, a drop below 8,020 could signal downside risk. Investors should monitor these levels for insight into future price movements. 

Data Source - Refinitiv