Top Trading Tips For The FTSE 100 Index This Week

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When you analyse the markets according to the top performers and the bottom performers, it is clear that the mining and energy sector companies are dragging the FTSE 100 index lower. On Monday, 12 October the FTSE 100 index fell after posting its best weekly performance in 4 years. No surprise – mining stocks led the rout, followed by aerospace stocks. The mining index surged by 19 percentage points in the first week of October, but it is already 2.7 percentage points lower at the start of the new week. Leading the rout was Glencore PLC, despite its plans to shutter copper mines in Zambia, and the Democratic Republic of Congo. Glencore PLC also has plans to sell copper mines in Chile and in Australia.

However, the general consensus among analysts is that these divestitures will do little to inspire investor confidence in the absence of a turnaround in China, and higher commodities prices overall. Glencore PLC is facing a mountain of debt, and potential downgrades to its credit rating. That does not bode well for the stock. We should also bear in mind that whenever an index like the FTSE 100 goes through a week of strong gains, profit-taking is going to come into play. This is precisely why the index is trading lower, and in choppy sessions.

Constituent components of the FTSE 100 index

The breakdown of the constituent components of the FTSE 100 index is as follows:

  • Banks comprise 13.34%
  • Personal & Household Goods comprise 12.89%
  • Oil and Gas comprises 12.33%
  • Healthcare comprises 9.92%
  • Industrial Goods and Services comprise 6.02%
  • Telecommunications comprise 6.10%
  • Basic Resources comprise 5%

The highlighted 3 constituent components are among the companies that have performed the worst in the bottom 5 performers in the FTSE 100 index for the year-to-date. This means that if these sectors continue to perform at sub-optimal levels, they will also drag the FTSE 100 index into the red. It is also interesting to point out that the percentage weight of the largest constituent in the FTSE 100 index is 6.26% (HSBC Holdings), and that there are 101 constituents in the FTSE 100 index. The mining sector in the UK has plunged by 28.24% for the year to date, while the 1-year decline is even higher at 31.86%. Not surprisingly, industrial metals dovetail with the performance of the mining sector with a -38.87% decline for the year-to-date and a 26.48% decline for 1 year. Standard Chartered was downgraded recently and this helped to drag the FTSE lower, after Investec downgraded it from a buy to a hold.

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