The FTSE 100 has maintained its positive momentum as mid-week arrives, with the index climbing further into record high territory over 10,400 points.
UK stocks continue to benefit from the catch-up trade that has been in play for several months, as investors rebalance their US dominated portfolios amid concern over tech valuations and the falling dollar.
London’s top index is also benefitting from the presence of some of the world’s largest mining firms, such as Glencore and Rio Tinto. Miners are being lifted by a combination of dollar debasement fears and the race to acquire rare earths and critical minerals, primarily between the US and China.
In contrast, US markets have struggled to regain the momentum seen last year during the early weeks of 2026. Investors continue to question whether the earnings of the tech giants can live up to the huge valuations the likes of Microsoft, Meta Platforms and Alphabet now have.
The periodic sell-offs, such as the one seen yesterday (3 February), have so far been shallow and short term. They have not changed the fact that the US market is still at or near record highs, despite treading water recently.
“Yesterday’s news that US President Donald Trump plans to invest $12bn accruing critical minerals helped niche mining stocks – with many up double digits in trading,” said Emma Wall, chief investment strategist at Hargreaves Lansdown.
“The president is keen to break the US dependence on China for critical minerals, a key factor in recent trade negotiations.
“China dominates critical minerals supply chains, not just across Asia, but Africa and South America too – buying up mines, trading routes and manufacturing over many years,” she continued.
“It is estimated that China has more than 90% of the refining capabilities for critical minerals – placing it in a position of power for any nation or company looking to produce chips, electric vehicles, aid the energy transition, build high tech military equipment – the list goes on.“
Dan Coatsworth, head of markets at AJ Bell, noted it has not been all good news for UK equities investors.
“A lot of the focus since the AI theme emerged has been on the winners and while there has been attention on potential losers from the proliferation of artificial intelligence, this part of the story has mainly stayed in the background.
“That changed on Tuesday when a raft of data and software businesses endured double-digit share price losses on the launch of a new suite of tools from AI outfit Anthropic for the legal sector.
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“RELX has a large presence in the legal space and was in the teeth of the resulting storm. It was among several names to endure double-digit declines as investors weighed the wider implications. To what extent AI can disintermediate traditional data analytics and software firms is not yet clear, but a lot of investors weren’t sticking around to find out.
“Concerningly for the likes of RELX, London Stock Exchange, Rightmove and Sage there’s little sign of a share price recovery today, with bargain hunters not tempted to step in.
Susannah Streeter, chief investment strategist at Wealth Club, reflected on how the continuing risk of a fresh military conflict in the Middle East is impacting markets.
“London’s FTSE 100 has scaled fresh heights as its defensive qualities shine once again in an uncertain world. Investors are grappling with the fallout from a tech sell-off and are assessing deteriorating relations between the US and Iran.
“The FTSE hit fresh record levels in early trade, as investors sought solace in its constituents with mining, utilities and energy stocks making gains.
“After a US fighter jet shot down a drone in the Arabian Sea, it’s creating nervousness about the eventual outcome as tensions remain high between Washington and Iran,” she continued.
“Oil prices have shifted higher as supply concerns are back in focus in the Middle East, with the benchmark Brent Crude, trading around $67 a barrel. This is giving support to energy giants on the FTSE 100 in early trade.”
