Markets Rally Amid ECB Rate Cut & UK Business Gloom as Tariff Threats Stir 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 0.34% on 31 January 2025. Utilities, Energy & Industrials sector has witnessed a substantial growth. Technology & Basic Materials sector faced a minor decline. 

Macro Update:  British business confidence fell for the fifth consecutive month in January, with the Lloyds Bank Business Barometer dropping two points to 37%, its lowest level in a year, reflecting concerns over a £25 billion tax increase announced in October. Despite a 16% decline in 2024 profits, Shell's shares rose as it increased its dividend by 4% and announced a $3.5 billion share buyback, marking the 13th consecutive quarter of repurchases. The NHS will introduce a cutting-edge gene therapy for sickle cell disease, signaling progress in healthcare. Meanwhile, the FTSE 100 hit a record high of 8,646.88 points, driven by strong corporate earnings and a surge in precious metal miners, with Endeavour Mining jumping 7.2% following its production results. 

Top Market Movers: Among top gainers on FTSE 100 index, Smiths Group PLC (LSE: SMIN) witnessed a rise of 11.53% followed by Next PLC (LSE: NXT) which gained around 2.65%. 

Commodity Update: On Friday, tariff concerns drove the dollar and gold prices up. U.S. economic growth data for Q4 showed a slowdown yet remained strong enough for investors to anticipate gradual interest rate cuts by the Federal Reserve this year. The market is now awaiting the December U.S. personal consumption expenditures (PCE) price index report, a key inflation measure for the Fed. In commodity markets, gold rose 0.13% to $2,848.90, silver gained 0.58% to $32.68, while copper dropped 0.25% to $9,099.00. Brent crude rose 0.21%, closing at $76.33 amid tariff threats affecting U.S. imports from Mexico and Canada. 

Our Stance: U.S. President Donald Trump's announcement of a potential 25% tariff on Canadian and Mexican oil imports has stirred market uncertainty, contingent on oil prices and bilateral relations. Asian shares fluctuated, influenced by South Korea's tech stock movements and mixed reactions to central bank decisions—the Federal Reserve maintaining steady rates while the European Central Bank cut rates. Despite initial volatility from Trump's tariff announcement, U.S. stocks ended higher, bolstered by positive earnings from Tesla, even as Microsoft provided a lackluster outlook. Meanwhile, U.S. 10-year Treasury yields dipped to a six-week low following the ECB's rate cut but rebounded on signs of economic resilience in late 2024. The interplay of tariff threats, central bank actions, and mixed corporate earnings suggests a cautious yet resilient market outlook. 

FTSE 100 

The FTSE 100 closed at 8,646.88 on Thursday, rising 1.04% and forming a bullish candlestick pattern. The index remains above the 21-period Simple Moving Average (SMA), indicating a positive short-term outlook. With the 50-period SMA providing strong support, the upward momentum is expected to continue. The Relative Strength Index (RSI) stands at 72.90, signaling strong bullish momentum without reaching overbought levels, suggesting room for further buying pressure. These technical factors point to continued growth, making the FTSE 100 an attractive prospect for short-term investors. On the weekly chart, the FTSE 100 held steady, closing at 8,502.35, a slight 0.03% decline. It remains well above the 50-period SMA, currently at 8,167.15, and key support lies at 7,932. Resistance is seen at 8,700, and a break above this level could signal stronger bullish momentum, potentially eyeing the next resistance at 8,800. On the other hand, a move below 8,020 could raise concerns of further downside risk. Investors should focus on these levels to gauge the index’s potential price action in the coming weeks. 

Data Source - Refinitiv