Market snapshot: FTSE fervour falters, for now 

There was a hesitant respite for some US technology names which had more recently been under pressure, although elsewhere a batch of economic data led to the assumption that the Federal Reserve will be content to sit on its hands for the time being before considering any further interest rate cuts.

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In the tech space, NVIDIA Corp (NASDAQ:NVDA) moved higher after Meta Platforms Inc Class A (NASDAQ:META) announced a long-term partnership which will involve using millions of Nvidia chips for data centre build purposes. Meanwhile, reports of a growing stake by an investment house lifted Amazon shares by almost 2%, although the software sector failed to ride that particular wave.

Stronger-than-expected industrial production data, along with positive manufacturing and housebuilding numbers played into the minutes of the latest Fed meeting, where there was a strong majority to keep rates on hold. Indeed, there was also some support for increasing rates should inflation continue to prove sticky, which could lead to an immediate impasse on the appointment of a new Fed Chair later this year.

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General investor insouciance has weighed on the main indices in the year to date, with the S&P500 having added just 0.5% while the Nasdaq index is 2% lower. The more traditional Dow Jones has posted a gain of 3.3%, although each of these are eclipsed by the 6% rise of the Russell 2000 index which continues to benefit from the rotation trade as investors seek alternatives to the mega cap technology arena.

Indeed, despite any lingering domestic economic concerns, the FTSE250 has risen by 5.4% this year and is now just 1.8% away from the record high which it scaled in August 2021. It is the FTSE100, however, which has become the star of the show on the international stage as the investment stars have aligned.

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The reasons for the strength of the primary index are manifold. Surging gold and silver prices have been joined by copper, propelling the mining stocks, while increasing geopolitical tensions and governmental pledges to increase spending continue to lift defence stocks. 

The increasing likelihood of further interest rate cuts has reignited interest in the housebuilders on the possibility of renewed demand, while the relative lack of technology and software stocks, which are clearly under pressure elsewhere, is another attraction.

A weaker sterling is also an indirect boost, increasing the value of overseas earnings on repatriation, while an average dividend yield of 2.9% across the index underpins returns. There has also been strong buying interest from overseas investors, particularly from the US according to recent reports, all of which have combined to lift the primary index to yet another record closing high and a gain of 7.3% in the year so far. 

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Despite this outperformance, the FTSE100 remains cheap in relative valuation terms, with a 14 forward earnings multiple comparing to 23 for the benchmark S&P500 in the US for example, leaving the door open to further possible returns.

The progress of the primary index paused briefly at the open, due to a raft of heavyweight stocks being marked ex-dividend, including the likes of GSK (LSE:GSK), Shell (LSE:SHEL), AstraZeneca (LSE:AZN), Imperial Brands (LSE:IMB) and Barclays (LSE:BARC) and a disappointing update from Centrica (LSE:CNA). On recent performance, however, this technical overhang could yet provide another attractive entry point for eager global investors.