Weak Pound And Strong Earnings Boost FTSE
Fiona Cincotta May 16, 2018 4:43 PM
Strong miners, a weaker pound and some impressive corporate earnings from the likes of Micro Focus and Burberry lifted the FTSE higher on Wednesday, as it flirted with its all-time high reached in January. However, a flat open on Wall Street and increasing geopolitical tension dampened spirits pulling the FTSE off its highs in the afternoon.
Weak Pound & Strong Earnings Boost FTSE
Strong miners, a weaker pound and some impressive corporate earnings from the likes of Micro Focus and Burberry lifted the FTSE higher on Wednesday, as it flirted with its all-time high reached in January.
However, a flat open on Wall Street and increasing geopolitical tension dampened spirits pulling the FTSE off its highs in the afternoon.
Micro Focus hits top spot
The top spot on the FTSE was filled by Micro Focus following a revelation by the software provider that revenue is now expected to be above guidance in H1. Whilst this is primarily down to an usually large licence deal closing earlier than expected, excluding this deal revenue was towards the better end if the guidance anyway.
Shares were up some 10% in early trade and are now just easing off those highs, in a complete turnaround of sentiment for the firm, which only in March experienced a huge sell off following the resignation of the then CEO and a warning over a revenue drop.
Burberry was up over 3.5% following an upbeat corporate update. The market had set the bar fairly low for Burberry, given that it was in the midst of a top management turnaround.
Still the luxury brand pulled it out of the bag reporting a rise in full year profits in addition to a new £150 million crowd pleasing share buyback.
Sterling fails to hold $1.35
The pound has been unable to pull itself out of the doldrums following a month of weak data, a dovish Bank of England and growing concerns over the health of the labour market.
Whilst the bulls retook $1.35 this was not only short lived but also more of a story of fleeting dollar weakness, rather than any serious pound strength.
Dollar hits fresh 5 month high
King dollar continues to reign strong, on track for its third straight session of gains. With stronger than forecast industrial production figures and housing permits overshadowing weaker housing starts, plus 10 year treasury yields at 3.07, the dollar is moving comfortably higher, recovering from a brief slip up on the releases.
With no further data due, investors will look ahead to tomorrow initial jobless claims.
Dow Struggles for Direction
The Dow is struggling for direction in early trade, as increased geopolitical tensions plus high yields fight against solid growth and earnings from the likes of Macy’s.
It is not all that surprising that North Korea’s Kim Jong Un has pulled out of talks with South Korea and threatens to do so with Trump as well.
It was all going a bit too smoothly for it to be believable. Whilst the move is weighing on sentiment for equities we haven’t seen an increased flow in safe havens, in short the market will probably just shrug this off.
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.