FTSE rebounds after strong finish in US

After three days of heavy selling and taking the lead from the US and Asia overnight, equity indices across Europe finally rebound. In a very volatile session the Dow Jones turned an early 500-point decline into a 567 point increase. The S&P and the Nasdaq also carved out gains of 1.8% and 0.32% respectively. 

Meanwhile within the first hour of trading, the FTSE had gained 0.6%, a minimal increase given the 4.5% selloff which UK stocks had experienced over the past few sessions. Whilst is an encouraging start for the FTSE, investors will be keeping an eye on US futures which are once again pointing to a softer open. Whilst we don’t expect this sell off to continue for an extended period of time, given that the fundamentals remain strong and unchanged, it is difficult to call the bottom and judge whether stocks have fallen sufficiently for investors to see value once again.  

Tesco share price hit by unequal pay claims 

Tesco was firmly out of favour in early trading as it has found itself in at the centre of an unequal pay claim. The super market giant could face a record fine of around £4 billion, to settle demands from 200,000 female Tesco workers who in some cases earned as much as £3 per hour less than their male counterpart. It is a real shame that Tesco has found itself embroiled in yet another example questionable morality. The timing of this announcement has massively deflected from Tesco’s improved profit and dividend guidance for 2018 announced just one day ago. 

Elsewhere Capita was also showing signs of weakness following a down grade from HSBC. 

 Forex markets calm amid equity volatility 

Whilst there has been a lot of action in the equity markets over the past few session, trading in forex has been much more muted. The dollar remains steady around 89.50 supported by higher interest rate expectation. Whilst there is little high impacting US data this afternoon, investors will be listening out for influential Fed official Williams as he speaks later today. Investors will be particularly keen to listen to his views on high bond yields and the recent market volatility.  

Pound still sub $1.40 as focus shifts to BoE 

GBP/USD remains subdued, as investors start to position themselves for the Bank of England’s Super Thursday. There has been very little in the way of positive UK data recently and cracks are once again appearing in the Conservative party as they try to establish what the UK relationship with the EU should look like post Brexit. 

These are not favorable conditions for the pound, however GBP/USD has held up reasonably well given the challenges it is facing. With no high impacting data from the UK or the UK this afternoon, investors will start to position themselves for the Bank of England’s Super Thursday releases – the BoE rate decision, the minutes from the meeting and the quarterly inflation report. 

GBP/USD is currently trading at $1.3940 where it is finding some resistance. A break through this level could open the doors to $1.39 before heading towards support in the region of $1.3840. On the upside, the bulls will keep the important psychological target of $1.40 in sight.