FTSE on the flatline after of Theresa May's plan B
Fiona Cincotta January 21, 2019 4:09 PM
The FTSE recovered quickly from a dip on the open, rising to just shy of 7000, before moving back to the flatline. Oil majors offered support to the FTSE thanks to stronger oil prices.
The FTSE recovered quickly from a dip on the open, rising to just shy of 7000, before moving back to the flatline. Oil majors offered support to the FTSE thanks to stronger oil prices. Multinational consumer goods stocks were also in favour whilst the pound was weaker. However, as the pound pared losses in the afternoon, multinationals lost the benefit of the preferential exchange rate and the FTSE drifted back to break even.
Concerns over the health of the global economy kept pressure firmly on European bourses on Monday. Whilst Asian markets had bucked the trend and moved higher, European stocks and US futures were less buoyant following Chinese GDP figures. The Chinese economy expanded at its slowest annual pace since 1990 as the US – Sino trade war and policy decisions from Beijing impacted on consumer confidence. Given the importance of the Chinese consumer for global brands, a lowering of confidence would be expected to hit international firms sharply.
The US is closed for a public holiday, so the FTSE won’t have Wall Street dictating its direction this afternoon. This means that Brexit and Theresa May’s Pan B will take centre stage.
No big changes from Theresa May’s plan - B
The pound kicked off the week on the back foot ahead of Theresa May’s unveiling of Brexit Plan – B. Expectations for any major changes were very low. As expected, Plan B was remarkably similar to Plan A. The surest sign yet that Theresa May has not digested the size of her defeat in Westminster last week. The pound rallied 0.2% following her announcement, a relief that a no deal Brexit is not the Plan B.
The Plan B is due to be debated and voted on 29th January. As it stands the DUP are unlikely to change their position on Plan B .Should the deal fail to make it through the House of Commons traders will hope that an extension to Article 50 will quickly follow. Otherwise the UK will be crashing out of the European Union just 2 months later with no deal.
House builders fall on Rightmove data
House builders were noticeable decliners following disappoint house price data. According to Rightmove, house prices grew at the slowest pace since 2012 as Brexit uncertainty knocks consumer confidence. House prices price just 0.4% year on year in January, sending the likes of Taylor Wimpey, Berkley Group and Persimmon 2% - 1.6% lower.
Euro steady despite weak German PPI
Sticking with the forex markets, there was more bad news for Germany and the eurozone. The German producer price index, which measures inflation at factory door level, declined by -0.4% month on month, well below the -0.1% drop from the previous month. With data in Germany and the eurozone consistently falling short of expectations the ECB could struggle to convince the market that it is still considering raising rates later this year when it gives its announcement on Thursday. The euro was holding steady versus the dollar.
GAIN Capital UK Limited (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.