Barclays weighs on FTSE – UK GDP as expected – Traders eye Bernanke

<p>The FTSE 100 fell 0.1% on Wednesday with Barclays the key drag on the UK Index after the UK bank announced earnings that missed market expectations. Traders […]</p>

The FTSE 100 fell 0.1% on Wednesday with Barclays the key drag on the UK Index after the UK bank announced earnings that missed market expectations.

Traders maintained an eye towards tonight’s FOMC decision and the question and answers session with Fed Chairman Ben Bernanke to gauge clues as to his plans for an exit strategy from the current accommodative stance employed by the US central bank.

From a sector perspective it is the miners and the banks that are weighing on the FTSE, whilst support from the energy sector is helping to counter some of this to render a marginal fall on the UK Index.

Much of the weakness in the UK banking sector this morning is being dictated by Barclay’s earnings. The bank announced a 9% drop in first quarter profits of £1.66bn (pre-tax) which missed most analyst forecasts, but not by a huge distance. Most of the negative sentiment in the numbers themselves is weighted towards a drop in income at its investment banking arm, which fell 15% from a year ago, along with a 22% drop in income from its fixed income department. There had been a decent push in the share price of Barclays ni the run up to these numbers and so today’s fall is likely to have been exacerbated by traders locking in profits also.

Weakness in the price of Copper is also weighing on the heavyweight mining sector this morning. Copper prices are lower by 1.3% in trading and this is triggering a 1% fall in the mining sector.

Shares in Bodycote, the engineering firm rose as much as 14% to a near 12 year high today after the firm told shareholders that headline profit for 2011 would be at the top end of market expectations, continuing the positive sentiment surrounding the company that has helped to treble its share price over the last two years.

UK returns to growth in Q1, as expected
The UK economy returned to growth in the first quarter of 2011, growing by 0.5%, an improvement of a full 1% on Q4 2010’s contraction in GDP. There are a few positives to be read into the quarter’s growth; firstly that the economy indeed grew and secondly that there were no negative surprises in the data, particularly as there had been some speculation in the market that there may have been. The quarter’s feeble growth of 0.5% could convince the Bank of England that the economy may not be ready to digest a rate hike in the coming months however.

The GDP data gave sterling a good boost against the US dollar, with the GBP/USD rate rallying from $1.6445 to $1.6550, the high on the day at the time.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.