The FTSE 100 outperformed US indices significantly in 2022 as US tech stocks cratered while the FTSE 100’s defensive sectors provided support during economic uncertainty.
However, a recent tech rally has started to lift global equity sentiment and provided support for the FTSE 100. Layoffs by major tech companies combined with relatively upbeat earnings has helped spur investment into a tech sector which is responsible for a large proportion of the returns in broad global equity indices.
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News last night Microsoft – 3.2% of the MSCI World Index – were concerned about the outlook for 2023 has raised questions about the ability for US tech to ignite a global equity rally.
“Microsoft has proven one of the more durable names in the tech sell-off over the last year so its gloomy outlook will do nothing to improve weak sentiment towards the sector. It also sets an uncomfortable tone ahead of updates from its tech rivals,” said AJ Bell investment director Russ Mould.
Wait and see mode
US futures were falling while the FTSE 100 was broadly flat at the time of writing, as investors digested the implications of Microsoft’s comments, and whether a recent global equity rally can be sustained.
Investors will be in wait and see mode and looking forward to US GDP figures tomorrow to judge how far the Federal Reserve will go with additional rates hike in early 2023.
“Thursday’s fourth quarter GDP figures for the US could either reinforce or blow-up expectations for a soft landing for the American economy, with core inflation numbers on Friday helping to provide some insight into the Federal Reserve’s decision making ahead of its crunch meeting next week ,” Mold said.