UK Stocks Boost FTSE to 3-Month High

The premier UK stock index reached a 3-month peak on Friday, pushed by companies with external exposure as monetary policy easing supports cost of borrowing.​

Top Gainers

Global stock markets experienced a turbulent month as assessments of global economic growth were reevaluated. However, this has also led to expectations for more monetary policy easing from central banks than previously anticipated, providing broad support for internationally exposed UK companies. Beyond general trends, some companies stand out from their peers with their performance and may continue to deliver surprises.

The pharmaceutical sector contributed most to recent gains on the FTSE 100 index, though volatility in the index has closely mirrored fluctuations in crude oil prices. The two best-performing companies for the month are neither oil-related nor pharmaceuticals. They were Next, an apparel retailer, and Rolls Royce, an engineering company diversifying into technology. In third place was housebuilder Beazley, as further expected interest rate cuts by the BOE are viewed as supportive of the housing industry. Each has distinct circumstances contributing to their leading performance over the past 30 days.​

Continuing Trends

UK stocks have not performed as strongly recently as global peers, as traders worry Britain may experience an economic slowdown. Next's results provide relief, as the apparel company exceeded expectations in a period where consumers faced sustained high prices. However, examining its results closely mirrors the stock market: UK sales rose 0.6%, and overseas sales rose 21.9% year-on-year. Expanding brand awareness drives this growth, primarily in Europe and the Middle East. Therefore, a pickup in the Euro area could benefit performance more in the coming months and outweigh any slowdown in the UK economy.

Rolls-Royce continues its turnaround under new leadership, allowing profit to quintuple in the past year and benefitting from increased air travel post-pandemic. Specifically relevant to the UK is Beazley's performance, indicative of how expected interest rate cuts could help the financial sector recover. UK banks rose after the BOE Governor's surprise banks remained undervalued. A resurgence in UK insurers led by Beazley could support other financial companies as insurance valuations increase alongside banks.​

Back to Records?

With several sectors higher, the UK's Footsie regained 8400 but has faced resistance, risking a false breakout resulting from a double top formation. With solid support at 8300 and a pennant pattern in sight, the measured move points to further highs to 8560 with interim resistance at 8450. 8360 offers potential short-term downside support, but if breached, it could open the door to 8240.​

Source: SpreadEx / UK 100

Key Takeaways

The UK stock index reached a 3-month high on Friday due to internationally exposed companies benefiting from lower borrowing costs. Next, Rolls Royce and Beazley were the top performers, with Next's overseas sales growing 21.9% and Rolls Royce profit quintupling under new leadership. Beazley's rise indicates how interest rate cuts could boost the housing and financial sectors. While UK stocks have lagged global peers, solid sector gains and technical signals point to the Footsie retesting highs in the near future.​