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FTSE rallies as risk appetite rebounds

The FTSE gapped higher on the open and managed to maintain its gains throughout the day, as risk appetite rebounded quickly following yesterday’s trade war fallout. With commodities slowly recovering after a hammering in the previous session, oil stocks and miners cautiously edged higher, whilst pharmaceuticals led by AstraZeneca posted the biggest sectorial gains. Paddy Power experienced a notable jump after England’s defeat by Croatia was considered a win for the bookie.

Earning season in focus
Wall Street has continued the rally on from Europe with all 3 principal indices posting solid gains, Traders are brushing off the escalating trade spat and turning their attention to the unofficial start of earning season. Expectations are running high for Q2 earnings, which are expected to have grown 20% from the same period last year, on an increase of 8.1% of revenue. 
The US economy is robust, benefits from Trump’s tax cuts are expected to continue being felt and consumers are spending which adds to speculation of stronger figures and may go some way to overshadowing fractious trade policies and concerns about higher borrowing costs which have plagued the market over recent weeks.  The big-name financials which are due to kick off earning season tomorrow are Citigroup and Wells Fargo.

Pound higher on May’s Brexit Whitepaper
The pound remained firm on Thursday supported by the release of the government’s whitepaper on the post Brexit UK – EU relationship. The substance of the white paper has come as no surprise given the showdown last weekend, and the EU are showing a softer tone even before analysing the paper. All the noises coming from the EU are encouraging; however, Theresa May is by no means on safe ground yet. With Conservative Brexiteers firmly against this softer stance May can expect to have problems when the Brexit trade bill is voted on next week.

US CPI closes in on 3%
After a strong rally in the previous session, the dollar was pausing for breath on Thursday, trading marginally lower as investor digested inflation data. Whilst inflation was pushing towards 3% year on year as expected, the monthly CPI figure fell just shy of expectations. Core CPI, which removes more volatile items such as food and fuel pushed beyond the Fed’s target of 2% to 2.3% in June. Whilst CPI is not the Fed’s preferred measure of inflation, the prints are sufficient for traders to believe that the Fed will stay on track with 4 rate rises this year as planned. 


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