FTSE 100: why is it so outgunned by the Nikkei?

The Japanese index firmly trumps its UK peer. The reason could be Covid-19.

FTSE for FRIDAY (FTSE:UKX) 

The Nikkei 225, Japan’s stock market, recently traded at just under 29,000 points. Its high, pre-pandemic, was at 24,000 points.

There is an interesting comparison with the UK FTSE 100, which reached 7,700 pre-pandemic and is now struggling at 6,500 points.

I certainly have a sneaking suspicion that greater success in protecting a country’s population against Covid-19 can introduce confidence in the marketplace.

Japan, with a population roughly double the UK, also an island nation, with a population density 25% higher than the UK, has suffered just over 5,000 Covid-19 deaths in the last year. The UK has had more than 100,000 fatalities.

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Unfortunately, this theory fails to explain why the US economy is performing well despite mortality rates not being terribly far behind the UK, adjusted for population size.

However, the chart (UK in purple) below certainly gives pause for thought. The UK is down 13%, while Japan is up 20% since before the virus hit.

As for the FTSE for Friday, trades above 6,615 points currently calculate with the potential of recovery to an initial 6,642 points with secondary, if exceeded, working out at 6,710 points. At present, the indications certainly suggest an upward day is imminent.

The alternate scenario is fairly nasty, as below 6,497 looks troublesome, allowing reversal to an initial 6,428 points with secondary, when broken, at 6,398 and hopefully a bounce. There is a little problem if 6,398 breaks, risking the start of a cascade of reversals in coming days and weeks to 5,720 points.

Have a good weekend.

Source: Trends and Targets. Past performance is not a guide to future performance

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of interactive investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or interactive investor will be responsible for any losses that may be incurred as a result of following a trading idea.