FTSE Drops Lower in Lacklustre Session

In a slow, uninspiring session, caught between US Presidents Day public holiday in the West and Lunar New Year in the East, the FTSE struggled to keep its head above water. After a short spell in the black, the FTSE slipped deeper into the red as Monday’s session progressed.

The construction sector was unable to shake off the most recent housing price data which showed price growth was well below average for the second straight month, fuelling concerns over the health of the housing market. Elsewhere on the FTSE, the banking sector was pointing to a fairly solid performance as investors prepare for barrage of earnings from the banks across the rest week.

Busy week for the banks

HSBC will kick off with earnings tomorrow, which are expected to be a high point for the bank as it is expected to return to growth after a decade of declining revenue. This will be followed by Lloyds on Wednesday, where investors will be paying particular interest to any dividend increase as key to the future performance of the stocks price. Barclays will update the market on Thursday and finally Royal Bank of Scotland on Friday.

Sterling below $1.40 boosting the FTSE?

It is also worth noting that these updates from the banks come at a time when the Bank of England could be looking at adopt a more hawkish approach to monetary policy over the coming months, producing a higher interest rate environment, which is beneficial for the banking sector. Mark Carney is due to speak later this evening at 18:45 GMT, which could induce some volatility into the pound in an otherwise lacklustre session, potentially paving the way for a more notable move on the FTSE, on the open tomorrow.

The FTSE has failed to recover from the recent global equities sell off in the same remarkable way as Wall Street or even the Dax. Whilst earnings could give the FTSE the much-needed boost that it is looking for, investors may need to sit tight until Wednesday for the UK wage data, which, if disappoints could bring the pound back below $1.40 and offer support to the FTSE index.

A word on oil

Oil has continued to climb higher at the start of the week, despite the weaker dollar. WTI is seen extending its rally as positive fundamental are overshadowing concerns of increasing US production. Friday’s Baker Hughes rig count went some way to calming nerves as only 7 new active US rigs were added, compared to 26 the week before. Furthermore, with OPEC firmly in control of the oil production limits and the OECD forecasting greater demand for oil going forwards, it is easy to see why the bears are back targeting $63.50.