The FTSE 100 index is doing well this year and is beating the Dow Jones index in local currency terms. It has risen by over 6% this year, a better performance than the Dow Jones, which has risen by about 4%.
Dow Jones vs FTSE 100 index
Bank of England rate cuts
The Footsie has risen because of the rising hope that the Bank of England (BoE) will start to cut interest rates this year. Besides, the most recent data showed that the country’s inflation dropped to the Bank of England’s target of 2.0%.
Stocks do well when there are signs that a central bank will start to cut interest rates since lower rates make bonds less attractive.
The FTSE 100 index rally has been in sync with other European indices. In Italy, the FTSE MIB index rose by over 9% this year and hit its all-time high in May. The same is true with the CAC 40 and the German DAX index.
Recently, however, the FTSE 100 index has pulled back as investors wait for the upcoming UK election. This election will be important as it will likely lead to a change of government, with Tories expected to lose it substantially. They have been in power in the past 13 years.
It is unclear how UK equities will react to a victory by the Labour Party. Some of the top companies that could be impacted are the likes of BP (LON:BP) and Shell (LON:SHEL), which could be forced to pay higher taxes.
The FTSE 100 index has also jumped because of the rising interest from international companies. Royal Mail’s parent company, IDS, is being acquired by a Czech billionaire.
DarkTrace, a leadng cybersecurity company is being bought by Thoma Bravo while DS Smith is being bought by International Paper. There are rumours that Doordash was in talks to acquire Deliveroo.
Top FTSE 100 index stocks
Most FTSE 100 index companies have risen sharply this year. Darktrace (LON:DARK), which re-entered the Footsie, has jumped by over 57% this year because of its acquisition.
Hargreaves Lansdown (LON:HRGV), the broker and wealth manager, has also soared by over 56% this year as hopes of a buyout increased. CVC Capital, a leading recently IPOed, private equity company, has placed a bid for the company. If the deal closes, it could value the company at over $5.4 billion, higher than the current £5.3 billion.
Rolls-Royce (LON:RR) share price has also been the third-best performing company in the FTSE 100 index as it jumped by over 53%. It has also risen by over 193% in the past 12 months and by 426% in the past 2 years.
Rolls Royce has soared because of the recovery of the civil aviation industry which has led to more revenues and profitability. It has also benefited from the recent demand for military equipment because of the ongoing wars in Ukraine and Israel.
NatWest (LON:NWG) Group’s stock has surged by over 42% this year, making it the best banking company in the FTSE 100 index. It has benefited from its strong dividend payouts and profits amid high interest rates. Other UK banks like Lloyds (LON:LLOY) and Barclays (LON:BARC) have done well too.
The other top-performing companies in the FTSE 100 index are miners like Anglo American (JO:AGLJ) and Antofagasta (LON:ANTO), which have risen by over 40%. This rally continued after BHP Group (LON:BHPB) placed a bid on Anglo American, which the latter rejected.
Not all FTSE 100 index companies have done well. Burberry share price has dropped by almost 40% as its demand from China waned. It has continued to underperform companies like LVMH (EPA:LVMH) and Hermes.
The other top laggards in the Footsie were the likes of Entain (LON:ENT), JD Sports Fashion, Croda International, and Reckitt Benckiser (LON:RKT).
This article first appeared on Invezz.com
