The stock markets closed the week close to their highest levels in more than two years encouraging both the Daily Telegraph and the Mail to publish front page headlines on Friday declaring 'Share Prices Up'. The FTSE 100 jumped more than 100 points on Thursday to hit a near 29-month high of 5859 before retrenching slightly on Friday to be up almost 3.5% for the week. The main driver was the Federal Reserve's fresh stimulus on Wednesday - dubbed 'QE2' - committing to buy $600 billion in government bonds to support the U.S. economy. The package has heightened the appetite for risk globally with funds flowing away from traditionally defensive sectors like pharmaceuticals and foods into higher 'beta' sectors such as mining, energy and finance. The Bank of England however left its own emergency measures unchanged at this stage, resisting pressure for further quantitative easing and holding interest rates at an historic low of 0.5%.
Unsurprisingly, the markets were flush with new highs this week: 135 highs versus 30 lows indicating continued bullish intent with money flowing especially strongly into the mega caps; the FTSE 100 outperforming both the AIM Market, and the FTSE 250. As the money flows into the big index and the Fed remains accommodative, Technical Analyst Robert Newgrosh’s FTSE 100 target of 10,000 by 2012 is looking more achievable.
The hard and the soft of it
But the weight of money isn't only pouring into the stock market. Hard and soft commodities have continued their surge on the confirmation of QE2 with Gold, Silver, Coffee, Sugar, Cotton and Oil products all posting at least 12 month highs. Commodity investors are betting that the increased supply of paper money will lead to a ramp in real world inflation. So it’s no surprise to see companies specialising in their production continue to grace the new highs list from the mega cap resources and energy stocks such as BHP Billiton (LON:BLT) , Antofagasta (LON:ANTO) and Xstrata Plc (LON:XTA) to a whole swathe of smaller soft commodity producers including New Britain Palm Oil (LON:NBPO) , M.P.evans Group …
