This week we have already discussed the copper explosion, but now it’s beginning to drag other asset classes up to. The FTSE100 has broken into new all-time highs, but what happened, and what happens next?
The Rally Recap
On July 10, the FTSE 100 closed at a record 8,975, led by massive gains in mining and resource stocks. Glencore, Rio Tinto and Anglo American all popped higher as copper surged on the back of Trump’s new 50% copper import tariff.
This marks a nearly 9% year-to-date gain for the FTSE, making it one of the better-performing major indices this year.
THIS IS NOT A UK ECONOMY STORY
Let me be super clear, this isn’t a celebration of UK growth. Now David Beckham free kick against Greece type anyway.
Why?
Well, the FTSE100 is not a barometer of Britain’s economic health. Over 75% of FTSE100 company revenues come from outside of the UK.
It’s dominated by global multinationals in mining, energy, pharmaceuticals and consumer staples.
So those thinking this must be good for the British pound. Think again.
If anything, a weaker GBP could often boost the FTSE100 because many of its earnings are USD denominated.
The UK is suffering from a recent bout of poor data, with stagnant growth, retail sales and cautious BoE policy, the GBP weakness is likely to remain.
What’s Driving the Move?
1. Trump’s copper tariff caused copper and other metals to rip higher. UK listed miners became direct beneficiaries. Rio Tinto and Glencore shares jumped over 5% each, Anglo American jumped over 7%.
2. GBP/USD is struggling to gain any traction, a weaker GBP against the USD could amplify overseas earnings for FTSE companies.
3. EU-US trade negotiations have been ‘doing well’ and this could have bought some fresh optimism around global trade.
What Could Happen Next?
If all these drivers continue, then the narrative may not shift here.
Meaning we could see the FTSE100 continue to trade higher.
IF the GBP does begin to weaker on diminishing optimism from the Bank of England, then this could add fuel to the rally.
As a trader, I will be watching for daily chart pullbacks into key levels of support or back into the moving averages and will identify swing trading opportunities.
Hope this helps!
