FTSE heading for 7,000?

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It has been a turbulent week for the markets. Last week, financial commentators suggested we were staring into the abyss as the FTSE plummeted below 6,000 after the Referendum result. Now, in a remarkable change of fortunes, the FTSE sits at 6,504 and people are now speculating that we could soon visit 7,000 and hit record highs!

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The Brexit selloff has hit some companies hard: house builders, banks and airlines. However, on the whole the FTSE has fared relatively well. This is perhaps attributable to the FTSE 100 being a ‘global index’. The companies may be listed in London, but they operate significant parts of their business across the globe. As a result, this diversification has minimised the Brexit impact to some extent.

Some companies have prospered with impact of the Brexit. Consumer defensives and big exporters like Reckitts Benckiser (LSE:RB) and Unilever (LSE:ULVR) have performed well since Brexit due to their global business models. Pharmaceuticals – GlaxoSmithKline (LSE:GSK) and Astrazeneca (LSE:AZN) – have remained unscathed because of the weak pound. The price of oil, which has fallen below $50 per barrel, is now actually more expensive for some due to the strength of the dollar compared to the pound – boosting share prices for Royal Dutch Shell (LSE:RDSB) and BP (LSE:BP.).

With a number of the significant big-hitters in the index prospering after the Referendum result, it is possible that we may re-visit the FTSE highs of last summer. Mark Carney’s announcement yesterday that the Bank of England may reduce interest rates will create more favourable conditions for businesses and increase market sentiment further. With much of the uncertainty out the way, are we heading for a bullish summer?

Author Bio: Trader Tim is a writer for a number of financial publications including ADFVN, TradeSignaller and 7circles. He also writes for his own blog, Trader Tim’s Diary, which includes trading thoughts to help other traders learn from his successes and failures. He donates 10% of trading profits to charity at the end of each month. He can be reached via Twitter at @TraderTim5.

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