Frustrating Footsie all over the place

At the end of every calendar year it’s natural to look back and see where we’ve been, not only as a reminder of past successes and failures, but also to look for clues as to what to expect over the coming 12 months.

It can be a helpful exercise and, while past performance is not a reliable indicator of the future, the FTSE 100's (UKX) behaviour does explain frustration among investors in blue-chip shares.

Strip out the brief lurch lower in September and it’s traded a roughly 300-point range for the seven months since early May. And it’s the worst-performing domestic index, up just 2% in 2017 versus 10% for the FTSE 250 (MCX) and 21% for AIM. Excitable bitcoin addicts will tell you the cryptocurrency is up 1,000%!

This week’s performance is typical of blue-chips in recent months, with selling into rallies and buying of the dips.

Things started well, the FTSE 100 making its highest level in almost three weeks. However, falling short of technical resistance at around 7,480 was a signal that buying had dried up. A three-day losing streak worth over 170 points followed and took the index below 7,300 for the first time since late September.

A drop in the value of the pound Friday lunchtime amid doubts over a breakthrough in Brexit talks, triggered a recovery – the FTSE 100 rose from 7,288 to 7,345 – but the index is still down on the week. If we’re playing the blame game, direct your ire at Babcock International (BAB) and the finance sector.

Despite director share buying this week, Babcock is struggling to make a rebound stick following a downgrade by Morgan Stanley Friday. The broker still thinks the shares are worth more than this, but concerns around margins have damaged sentiment.

Banks celebrated passing the Bank of England’s stress test this week with a mini-rally, but gains have since disappeared. Insurers have run into selling too after a reasonable performance recently.

Biggest losers over the five days are the miners – copper giant Antofagasta (ANTO), Glencore (GLEN), Randgold Resources (RRS), Anglo American (AAL), Fresnillo (FRES) and the rest are all nursing big losses. It’s why the FTSE 350 Mining index is at a two-month low.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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