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Why the FTSE 100 is ‘primed for more upside’

Falling UK 10-year gilt yields could mean more upside for UK’s blue-chip stock benchmark.

  • FTSE 100 Futures were trading as low as 7,030 on Friday morning (30 July 2021)
  • The benchmark closed nearly one percentage point higher on Thursday, driven by upbeat earnings and dividend declarations
  • DailyFX analysts say more upside is in store for the index
  • Feeling bullish or bearish on the FTSE 100? Open an account with us to take a position on the index.

FTSE 100 Futures: what’s the latest?

UK blue-chip equity benchmark FTSE 100 index is down in pre-market trading, IG data indicates.

IG's live FTSE 100 Futures price estimates showed the index trading at a low of around 7,030 at around 06:30 GMT+1 on Friday.

Why did the FTSE 100 close higher on Thursday?

This represents a 0.7% decrease from Thursday’s gains, when the Footsie had closed nearly one percentage point higher at 7,078.42, driven by strong earnings and bigger dividend declarations.

The rally was led by pest control company Rentokil Initial, which recorded the largest increase of the day, up 6.8%, on the back of an 18% revenue jump.

This was closely followed by publishing and exhibitions group Informa, whose shares spiked up 5.7%, after it raised its revenue forecasts for the full year on the hopes of physical events returning.

Meanwhile, oil major Royal Dutch Shell closed 3.8% higher, after reporting a second-quarter profit surge to US$5.5 billion, launching a US$2 billion share buyback programme, and boosting dividend by 38%.

On the flipside, the top faller of the day was BT Group, down 6.6%.

The telco’s shares were down as much as 8.8% at one point, after it posted a 3% year-on-year drop in revenue to £5.07 billion. This was slightly below UBS analysts’ predictions of £5.15 billion.

What’s the forecast ahead?

DailyFX markets writer Warren Venketas said that the FTSE 100 is ‘primed for continued upside’ as a result of falling UK 10-year gilt yields.

‘UK gilt yields represent the opportunity cost of investing in UK stocks, therefore, when bond yields fall, US stocks become more attractive (as a rule of thumb) and vice versa,’ he wrote.

Current price action, which shows the benchmark trading above the 100-day EMA (exponential moving average), also confirms the recent shift to the upside. ‘This uptrend may ensue if prices manage to close the week above 7100,’ Venketas added.

IG’s client sentiment data shows that 66% of retail traders are net-long as of 30 July. Traders are now at their most net-long on the FTSE 100 since 28 February this year.

What’s your view of the FTSE 100? Take a long or short position now.

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*Based on revenue excluding FX (published financial statements, June 2020)

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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