FTSE 100 shakes off January blues to fly two per cent on first trading day of 2023

The FTSE 100 shrugged off the January blues to fly more than two per cent during the opening session of 2023.

London’s premier index was kicked higher by oil giant BP popping more than 3.8 per cent, while the possibility of a rebound in Asian travel saw shares in British Airways owner IAG and engine maker Rolls Royce rise sharply in early trading.

A near one per cent weakening in the pound also lifted the FTSE 100 higher. A large proportion of the index’s constituents booked their profits in overseas currencies, bumping their sterling-denominated income.

The domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, skid nearly two per cent higher this morning as well.

The morning bounce comes despite a wave of industrial action and rail strikes in the UK which has hampered the return to the office on the first working day of 2023. 

Risk sentiment also improved despite traders bracing to navigate a tough new year in which in the UK economy is likely to slide into a long recession sparked by high inflation and interest rates.

Uncertainty over the spread of Covid-19 in China and the future of Xi Jinping’s ‘zero covid’ policy had also sparked a mixed reaction in Asian markets overnight, as investors weighed the future of the draconian lockdown policies in the world’s second biggest economy.

Analysts said today that London’s flagship index had shrugged off uncertainty in early trading however to start the year on a bright note.

“In the UK, the premier index opened the year on the front foot in early exchanges, driven by mark-ups across various sectors, such as oils and banks,” said Richard Hunter, head of markets at trading platform Interactive Investor.

“In addition, the possibility of increased Asian travel also boosted the likes of International Consolidated Airlines and Rolls-Royce, while the initial risk-on approach came at the slight expensive of the more defensive sectors.”

The bounce comes after a resilient performance in 2022, with the FTSE-100 eking out a gain of 0.9 per cent for the year, as well as an average dividend yield of 3.7 per cent.

The gain, buoyed by the UK’s oil mega caps and relatively low density of growth tech stocks, meant that the index became a favourite among international money managers.

The more domestically focused FTSE-250 did not enjoy a comparable boost however as it shed 19.7 per cent of its value for the year as the UK economy slumped into recession and struggled for growth and stability.