FTSE 100 index makes a spectacular comeback as mining stocks lead
The FTSE 100 index jumped sharply on Friday as global stocks rebounded. The blue-chip index surged to a high of £7,375, which was the highest level since August 31st. It has jumped by more than 3.50% from its lowest level in September.
Mining stocks lead rally
The Footsie staged a strong recovery helped by mining stocks as investors downplayed the rising risk of a global recession. The Anglo-American share price surged by more than 6.30% making it the best-performing stock in the index.
It was followed by Glencore, whose shares climbed by 5.54%. Glencore is one of the biggest mining companies in the world with a market cap of over 61 billion pounds. Rio Tinto, another diversified mining company had it stock rise by 5.20%. Other leading mining stocks that propelled the FTSE 100 index were Antofagasta, and Fresnillo, Endeavour Mining.
These stocks jumped as the prices of key commodities rallied. For example, gold, silver, copper, lead, nickel, and zinc soared by more than 1% as fears of a recession waned. In addition, other top global indices bounced back, with futures tied to the Dow Jones, S&P 500, and DAX rising by over 50 basis points.
The FTSE 100 index also rose as the prices of natural gas retreated. Top European natural gas benchmarks have dropped in the past few days even after Russia stopped flows as we wrote here. Gas for October deliveries has seen its price fall from over $9 in July to $8.
This, in addition to the decision by Lizz Truss to energy prices has made UK stocks more attractive. For one, analysts expect that this cap will lower the cost of doing business and inflation and force the Bank of England to slow its rate hikes.
FTSE 100 forecast
The four-hour chart reveals that the FTSE index made a spectacular recovery on Friday. As it rose, the stock managed to move above the important resistance level at £7,327, which was the highest point on September 6.
The stock managed to move above the 25-day and 50-day moving averages while the MACD has moved slightly above the neutral point. It appears like the index has formed a slanting double-bottom pattern.
Therefore, the stock will likely continue rising as bulls target the key resistance level at 7,500. A drop below the support at 7,327 will invalidate the bullish view.
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