How FTSE 100 smashed 7,400 and made another record

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How FTSE 100 smashed 7,400 and made another record

So, no surprises at the Federal Reserve, which did exactly as the market expected, hiking interest rates by 25 basis points. But what happened to the hawks? Policymakers hint at just two more increases in 2017, fewer than expected. That's a huge green light for risk assets and explains why investors are piling into equities Thursday.

Almost everyone had anticipated the Fed move up to 0.75-1%, and it seems Fed chair Janet Yellen and her colleagues are doing a great job managing the path to maximum employment and price stability.

"Overall, we continue to expect that the economy will expand at a moderate pace over the next few years," said Yellen last night, easing concerns that an overheating economy would require more aggressive tightening.

That there were no upward revisions to existing projections for a federal funds rate of 1.4% at the end of this year, 2.1% at the end of next year, and 3% in 2019, put pressure on the dollar Thursday, sending sterling up to $1.23 briefly from near $1.21 Tuesday.

In a week dominated by central bankers, the Bank of Japan played a straight bat, and the Bank of England is expected to follow suit at midday.

Back this side of the pond, you could hear the collective sigh of relief across The Channel as Dutch voters backed Prime Minister Mark Rutte rather than far-right rival Geert Wilders. If this is a guide to sentiment across Western Europe, hopes are high that disruptive, Trump-like candidates will also fail in French and German elections this year.

Given this is what markets had been waiting for, traders hammered 'buy' buttons around the Square Mile. Their enthusiasm woke the FTSE 100 (UKX) from its recent slumber to add 71 points to 7,440.

That the blue-chip index now trades above 7,400 for the first time is no surprise to our reliable technical analyst Alistair Strang.

On Monday, he wrote: "Near-term, if the FTSE trades above 7,373 points, we are looking for growth toward an initial 7,398 points with secondary, if bettered, at 7,443 points." As I write, the FTSE 100 has just hit 7,443!

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According to Alistair's 'Big Picture' argument, expect "stutters around 7,520". However, it does throw up the tantalising prospect of much higher ground further out. "If the FTSE now closes a session above 7,393 points, or trades intraday above 7,408 points, it enters a path toward 8,186 points, with secondary a longer term 10,195."

So, where's the smart money going Thursday?

Short answer: miners.

Seven of the 10 biggest blue-chip risers are diggers, led by Anglo American (AAL) up 9%, Fresnillo (FRES) 7% and Antofagasta (ANTO), BHP Billiton (BLT), Rio Tinto (RIO) and Glencore (GLEN) not far behind. A weaker dollar should generate greater demand for commodities priced in the US currency.

Anglo has some extra oomph following yesterday's news that Indian billionaire Anil Agarwal, who already owns mid-cap peer Vedanta, is buying up to £2 billion of Anglo shares, or 12% of the business.

Agarwal's Volcan investment vehicle, which will become Anglo's second-largest shareholder, will not launch a full bid, and stock exchange rules preclude it from doing so for six months.

That dollar dip also kept interest in Royal Dutch Shell (RDSB) and BP (BP.) bubbling away, while there are also chunky gains for US-focused infrastructure firm Ashtead (AHT), and firms that do business in Europe like Croda (CRDA), Vodafone (VOD), easyJet (EZJ) and GKN (GKN).

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.