The FTSE 100 has been an incredibly interesting index to watch as of late. Between the fact that the index is commodities heavy and the roll out of the Brexit story, the index has seen some volatility. However, today, the index climbed higher on solid economic data out of the UK. Today, we’ll talk about the economic data that was released, why it sent the FTSE 100 skyrocketing, and what traders should be watching for ahead.
UK PMI Leads To Hawkish Opinions Of The UK Economy
As mentioned above, the FTSE 100 had an incredibly strong day in the market today, and for good reason. UK economic data was released, suggesting that the economy is growing in a big way at the moment. The data that was released was survey data known as the Purchasing Managers’ Index, or simply PMI.
The PMI is a survey among purchasing managers at manufacturing companies to see just how well they think the economy is growing. April proved to be overwhelmingly positive. In fact, during the month, the PMI rose to 57.3 from 54.2. Not only was this figure well above economists forecasts, it was the fastest pace of growth the figure has seen in three years!
What’s interesting is the source of this economic growth. According to the survey, the majority of improvement came from the domestic market. However, there was a solid increase in export business as well. Ultimately, growth in exports was attributed to better global economic conditions. This, mixed with the fact that the GBP has been on a downtrend, making UK goods cheaper around the world helped to lead to growth in export business.
Why The FTSE Is Seeing Strong Gains On This News
At the end of the day, this is all creating the perfect storm for the FTSE 100. You see, the FTSE 100 is a commodity heavy index. This means that a large portion of the companies that are listed on the index do business in the commodity market. With the GBP already having a rough time and most commodities priced using the USD, due to currency exchange rates, many of these commodity oriented companies were already doing pretty well. Now, the solid PMI data is giving them an added push.
You see, for PMI data to head upward, manufacturing data has to be doing well. At the end of the day, for manufacturers to manufacture products, they need the basic materials that go into those products. Basic materials is just another way of saying commodities. Things like gold, silver, copper, and more are all going to see gains in demand. Ultimately, that’s incredibly good news as demand gains equate to price gains, and price gains equate to value growth in the market.
What Traders Should Be Watching For Ahead
Moving forward, traders should be keeping a close eye on the FTSE 100 as the index is likely to present several profitable opportunities for traders. However, to turn these opportunities into money in the bank, you’re going to need to stay on top of the news. In particular, keep a close eye on UK economic data. If this data continues to improve, the FTSE 100 could continue upward. Also, make sure to watch the GBP and the Brexit stories. Any updates on either of these stories could lead to big movement in the FTSE 100.