FTSE through 7700 dollar steady after US GDP

The FTSE charged higher on Friday, pushing through 7700 putting it in line for a third consecutive weekly gain. Strong corporate updates from Reckitt Benckiser, Pearson and BT offered support to the index, as did a weaker pound.

Reckitt Benckiser back to its best
Reckitt Benckiser topped the FTSE leader board jumping over 8% on strong results. After a run of bad news for the firm, stronger than forecast sales and an improved outlook reminded investors of what Reckitt Benckiser was capable of before its series of one off disasters across the year including a cyber-attack and failed Scholl footcare launch.

Exports boost US GDP
US GDP printed at a very solid 4.1%, this was marginally lower than the consensus estimate of 4.2% and significantly below top end estimates of 5%. The US economy experiencing the fastest rate of expansion since 2014, thanks to increased consumer spending, business investment and government spending. Exports were also a big influence, most likely as foreign buyer purchased ahead of any tit for tat measures which could be implement by the US or its trade rivals.

This trade effect is expected to be a one off, with repetition in subsequent quarters very unlikely. Instead there is growing concern that the trade tensions will start to negatively impact the growth figure going forwards as tariffs result in higher costs, and collapsing orders, particularly in commodities such as soybeans and pork. The growth number and the impact of the trade tensions on it will come under increasing scrutiny as we move closer to the midterm elections, where President Trump is running the risk of losing control of at least one house of Congress.

The dollar was little changed following the impressive growth figure, trading flat versus a basket of currencies and remaining elevated versus the weaker pound.

Michel Barnier limits pounds gains
The pound remained close to the flatline across Friday after EU Chief negotiator Michel Barnier rejected a central part to Theresa May’s Brexit plan, making a hard Brexit increasingly more likely. With both the EU and the UK standing by their red lines, moving forward past this stalemate is next to impossible. A hard, messy Brexit appears to be the way forward and at $1.31 it is very likely that the pound isn’t pricing that in yet. There will now be a two week break until Brexit talks begin again in mid-August and when they do, the countdown will be on to the October deadline, this is expected to bring with it increased volatility in the pound as we move towards the Autumn.

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