Weaker Pound Gives FTSE A Boost in Dreary Session

The FTSE was performing better than its European counterparts in a rather dull start to the week, mainly thanks to a weaker pound. Whilst oil majors helped the FTSE higher in early trade as they traced the oil’s price northwards, oil’s strength was short lived. With a notable lack of drivers, after last week’s busy calendar, investors are awaiting fresh catalysts. China is closed this week for stat of the year of the Pig, so US earnings could attract more attention in an attempt to fill the void.

Oil pares gains
Oil failed on hold onto its recent rally, which saw it reach a two-month high in early trade. US sanctions on Venezuelan petroleum industry and OPEC supply cuts kicking in overshadowed concerns of economic slowdown and reduced demand. A drop in the number of US oil rigs to the lowest in 8 months also lent support. However, by the afternoon demand concerns and a stronger dollar sent oil 1.2% lower.

US earning season not as bad as feared (so far)
With Google due after the closing bell and other big names such as Disney, General Motors and Kellogg’s all set to release their numbers this week, the focus will remain on earnings. So far just shy of 50% of S&P firms have reported. According to FactSet 68.5% have topped expectations. This is what we would expect to see in an average quarter. It is clearly lower than what we have seen over the past three quarters, but they weren’t average. The worst fears have not come true, earnings have held up better than what most were expecting and as a result the US markets have rallied across earning season. Whether the move higher can be sustained depends largely on whether earnings continue to come through slightly above par and whether sentiment holds strong amid US – Sino developments.

Pound to $1.30 as Brexit hits the economy?
The pound traded lower after data showed that activity in the construction sector almost ground to a halt in January. The construction pmi dropped to 50.6, its weakest level in 10 months. This was down from 52.8 in December and well short of analyst’s expectations. There is a growing list of evidence of Brexit uncertainties hampering progress and dampening confidence across the economy. Nissan’s decision to dump Britain in favour of Japan for the latest X-Trail model, UK manufacturing and construction sectors nearing stagnation are just the latest.

The negative impacts of Brexit are becoming increasingly noticeable as we move towards 29th March with no deal in place. There is a clear feeling that the UK economy is slowing as Theresa May continues to go in circles with Brexit. Investors will now look towards the dominant service sector data tomorrow. Another surprise to the downside could see the pound slip below $1.30.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.