FTSE lower as investors await next catalyst

After drifting lower throughout the morning, the FTSE quietly pared losses in the afternoon heading back towards the flatline, before falling again towards the close

After drifting lower throughout the morning, the FTSE quietly pared losses in the afternoon heading back towards the flatline, before falling again towards the close. With the US shut for President’s day, traders are waiting for the next catalyst, resulting in a very dreary session. With little in the way of economic data to focus on, politics and the pound were once again under the spotlight.

Reckitt Benckiser was leading the FTSE, up over 5% following the release of impressive results. Micro Focus International was second on the FTSE leader board, trading 4.5% higher as it’s share buyback programme kicked in. 

Pound above $1.29
More broadly, the FTSE was lagging marginally behind its European peers thanks to the stronger pound. The pound continued to move higher versus the dollar on Monday, extending gains from Friday and pushing back over $1.29. The move higher in cable was more of a dollar weakness story, on improved risk sentiment thanks to US – Sino trade talk optimism. The pound was also finding support as investors start to once again price in an extension to Article 50, as last-minute Brexit talks to attempt to re-negotiate the Irish backstop arrangement show no signs of progress.

Labour breakaway pound negative longer term
The pound was moving higher, despite news of a Labour breakaway party. Whilst a breakaway from the main political parties is a rare event, is not in itself damaging to the pound. 

However, given that the breakaway group supports a second referendum this could be a fatal blow for the Brexit second vote campaign. Any fresh calls for a 2nd referendum will now be closely associated to the breakaway group and enemies of Corbyn. Labour can’t be seen to be supporting such a group. This means the longer-term impact of this notable event could actually be pound negative.

Whilst today has been a quiet day as far as economic releases are concerned, tomorrow could see a fresh injection of volatility amid UK wage data and Eurozone economic sentiment data.

Oil stays above $56.00
Oil remained in positive territory on Monday although slipped off earlier highs. After rallying to a three-month high of $56.73 in early trade, WTI has eased back, although it is still finding support at $56.00. 

OPEC productions cuts and US sanctions on Iran and Venezuela are hitting supply. Meanwhile trade talk optimism is boosting the demand outlook after months of trade tensions have weighed on global growth.

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.