FTSE 100 OUTLOOK BRIGHTENS

The headline UK unemployment rate edged up to 5.1% in December, as expected, but data released early in the European day Tuesday also showed that the number of people claiming benefits dropped by 20,000 in January, rather than increasing as analysts had predicted.

The numbers add weight to the idea that the UK economy is now on the way to recovery and that should bolster both the FTSE 100 and the FTSE 250 indexes of London-listed stocks, particularly after UK Prime Minister Boris Johnson’s so-called four-step roadmap to ease coronavirus restrictions, unveiled Monday, was broadly welcomed for its slow and cautious approach.

The FTSE 100 index of leading stocks has been held back by a strong British Pound and a large number of companies in the index with overseas earnings in sectors like banking and mining that have suffered from the global slump caused by the Covid-19 pandemic. A set of disappointing results from HSBC did not help Tuesday either, with the bank’s shares down 2.36% in early trading.

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Source: IG (You can click on it for a larger image)

However, the jobs data and the roadmap to recovery should help it in the next few days, particularly if traders become more optimistic that Chancellor of the Exchequer Rishi Sunak will deliver a Budget to further boost the economy on March 3.

As for the FTSE 250 index of second-tier shares, that is more focused on domestic businesses so should not be as affected as the FTSE 100 by a stronger Pound and therefore could outperform in the days ahead.

FTSE 250 PRICE CHART, ONE-HOUR TIMEFRAME (FEBRUARY 2-23, 2021)

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Source: IG (You can click on it for a larger image)