How FTSE 100 just smashed records

What a difference a year makes! The FTSE 100 dived as much as 171 points on the first day of trading in 2016, nearing a four-year low five weeks later. Today, the main index took less than half-an-hour to add the 58 points needed to break above 7,200 for the first time, despite a pile of potential nasties in the calendar for 2017.

A Santa rally had already nudged the FTSE 100 to a series of closing highs. It eventually broke above October's previous all-time best of 7,129 10 minutes before the close of play on New Year's Eve.

None of this surprised our technical analyst Alistair Strang. He continued his rich vein of form, repeating his long-held conviction that we'd see a new high by the time the closing bell rang right up until Friday morning. And he was right.

If you're looking for a hint at what comes next, Alistair wrote last week:

"The funny thing now is our secondary target above 7,158. Closure above such a level signals movement coming to 7,323 points." He added later: "If what passes for a collapse is coming, the index needs below 7,090 to raise an eyebrow as weakness toward 7,075 looks possible with secondary at 7,030. We rather suspect it's not going to happen given the underlying force upward."

So, the force is with the FTSE 100, but Tuesday's surge is no broad-based rally. Financials feature heavily among the best performers, with Barclays, Lloyds, Royal Bank of Scotland, Standard Chartered and HSBC all there.

High-yielding insurers Direct Line, Standard Life, Aviva and Legal & General are also in demand.

Clearly, a surge in UK manufacturing activity to a 30-month high improves optimism. The latest Markit/CIPS Purchasing Managers' Index (PMI) leapt to 56.1 in December, better than expected and up from 53.6 the month before. A read above 50 implies expansion.

Rates of expansion in output and new orders are among the fastest in the survey's 25-year history, said Rob Dobson, senior economist at IHS Markit.

"A plus point from the December survey was that the expansion was led by the investment and intermediate goods sectors, suggesting capital spending and corporate demand took the reins from the consumer in driving industrial growth forward."

That's great for exporters like Rolls-Royce, while the weak pound continues to drive companies like high-flying infrastructure firm Ashtead who do huge chunks of business overseas.

It's also a big help for mid-caps Rotork, a valve control systems firm, and pump maker Weir who are also benefiting from the latest rally in global oil prices. Brent crude just poked above $58 a barrel for the first time since summer 2015, providing a further lift for BP and Royal Dutch Shell as well as a host of others, including Tullow Oil, Enquest and Ophir Energy.

Gate-crashing the blue-chip party is InterContinental Hotels following an upgrade by Barclays. The broker switches its view on the hotels giant to 'overweight' from 'equal-weight' and raises its price target by 31% to 4,000p.

"We expect results on 21 February to be a positive catalyst," it says. "We also consider IHG to be the best play in the sector on a potential rebound in US growth as well as potential tax cuts. "

However, 40% of the FTSE 100 is in the red. And it's the retailers like Next, Marks & Spencer and Dixons Carphone that are doing the damage ahead of the usual Christmas trading round-ups.

Ahead of Next's numbers tomorrow, analysts at Deutsche Bank have had a rethink about the retail sector and cut their view on the high street fashion giant from 'buy' to 'hold'. Their price target is cut to 5,300p. Both Debenhams and Halfords drop from 'hold' to 'sell'.

"Retail stocks are typically early-cycle but there are risks a prolonged downturn means many could be value traps, particularly as the sector is typically showing average rather than extreme valuations," explains Deutsche.

And it's well worth mentioning the AIM market Tuesday. The AIM All-Share index has just hit 850 points for the first time since April 2014, helped by more positive news from Burford Capital, a global finance firm focused on law.

Heavily backed by our own stock picker Edmond Jackson, the company has just sold "several million dollars" in participation interests in its possible future proceeds in its investment related to the Petersen claims.

Spanish bankruptcy courts appointed Burford to provide financing to liquidators of the Petersen Group. It went bankrupt after the expropriation by Argentina in 2012 of a majority interest in US-listed energy company YPF, formerly owned by Spanish firm Repsol.

"The Petersen claims are high value and if successful could yield significant returns for Burford," said the £1.3 billion AIM company, which rocketed as much as 13% Tuesday.

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.