FTSE looking tired after Brexit fever

After the recent Brexit fever, the FTSE was very much in a wait and see mood.

After the recent Brexit fever, the FTSE was very much in a wait and see mood. Despite a move higher on the open, the index steadily edged lower across the morning, under the pressure of a stronger pound. It was not until Wall Street opened higher that the FTSE showed any interest in moving back into the black.

TUI jumps 6% on impressive earnings

TUI led the charge higher, jumping over 6% on strong corporate results. An 11% rise in annual earnings and growth of similar proportions expected next year, was enough to send the share price surging. TUI’s focus on higher margin hotels and cruises has helped it avoid the declines experienced by rivals, such as Thomas Cook. Whilst the outlook for the sector remains cloudy, particularly with Brexit uncertainties, TUI is well positioned to weather the storm. Whilst competitors complain of weather conditions impacting trade, as a group TUI ‘s earning were barely touched by such factors. 

TUI’s share price is down around 34% over the last 6 months thanks to investors negativity towards the sector as a whole. TUI’s results today, have set them apart from other players in the sector and that is being reflected in the jump in the share price.

Pound extends rally – expected to be limited
The pound climbed higher as investors cheered Theresa May’ s victory. Under Parliamentary rules, Theresa May is safe in her position for 12 months meaning she can get on with Brexit. Whilst the pound extended its recovery from a 20-month low on Tuesday, gains will remain limited. Theresa May has survived a coup, but her Brexit plan is still hugely unpalatable for many Conservative MP’s. The arithmetic highlights the desperate need for something to come out of talks with Brussels. She won the vote of no confidence with 200 votes. She needs to win 350 votes on her Brexit deal in order to push it through Parliament – a challenge which is still looking near impossible, particularly if Brussels aren’t playing ball.

ECB ends QE
The euro tumbled lower, even as the ECB ended their massive bond buying spree. A dovish Draghi, noting that risks had shifted to the downside was all it took to put the euro bears in control. Traders were already nervous about slowing growth momentum in the eurozone, so Draghi’s statement tweak to indicate a more negative outlook and revised growth outlooks for 2019 and 2020 was quickly reflected in the price of the euro.  The euro dropped to $1.1345, down from $1.1380 prior to the press conference. 

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