FTSE Reaches Record Highs After Rallying By Mining Shares

UK’s blue-chip index FTSE 100 is soaring to record heights on the back of a strong rally by mining shares, the falling value of the sterling pound after Brexit and optimism about the American economy.

The pound is down by around 10 percent against the euro and by 17 percent against the U.S dollar.

The slump boosted profits for several companies on the FTSE as they receive a large part of their revenue from international territories.

A surge in mining shares was behind the latest rally in FTSE. Silver producer Fresnillo went up by 5.2 percent while gold mining company Randgold rose by 4.8 percent. Mining major BHP Billiton saw an increase of 4.2 percent and rival Anglo American jumped by 3.5 percent. The prices were also reacting to gold climbing by 1.3 per cent reaching $1,156.90 an ounce.

In a statement Chris Beauchamp, chief market analyst at investment firm IG said,

Small losses are the order of the day across most stock markets today, but London’s traders have evidently come back from Christmas with a festive bounce in their step. The FTSE 100 is the star performer today, helped on its way higher by an excellent turn from the index’s mining contingent.

Rising optimism about the United States economy is further adding to the rally. Recent reports are showing that consumer confidence is hitting a 15-year high in the U.S. Investors are expecting increased government spending as the President-elect Donald Trump has announced a $1 trillion fiscal stimulus for the country.

The internationally-focused FTSE 100 has gained 13 percent in 2016 despite tumultuous events like Brexit and the U.S elections. The rally has added around £230 billion to the value of its top 100 companies. The FTSE 250 index which has smaller UK companies listed gained only 0.5 percent in the past few days and through 2016 has gone up by just 3 percent. Mining shares made a comeback in 2016 after commodity prices regained strength. The easing of fears of a Chinese slowdown as well as Trump promising significant investment into infrastructure boosted commodity prices. Similarly with oil prices at a one-year high, energy companies have also gained.

Mike van Dulken of Accendo Markets noted that there was optimism regarding the measures that are likely to be taken by Trump after he takes office next month. David Cheetham, market analyst at online trading group XTB however said that the rally was typical of the time period between Christmas and New year, with City workers calling it the Santa rally. Investors are overall expecting a volatile 2017 overall as Trump’s take over as the U.S President and UK triggers Brexit negotiations in March.

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