Melrose was the biggest decliner dropping some 7%, although the exact cause for the selloff remains unconfirmed. With the stock experiencing its worst session in 5 years we would expect a direct negative news report to have hit the wires. So far this hasn’t been the case.
Pound drops to 2 year low
The pound was offering support to the FTSE. Sterling dropped to its weakest level in 2 years of $1.2440 as recession concerns coupled with fears over Brexit are proving too much for pound traders to swallow.
Today the BRC revealed that retail sales slumped -1.6% year on year, confirming that any wage rise UK households are enjoying is not being reflected at the tills.
Finally, the prospect a no deal Brexit is running high. The House Speaker Bercow preventing MP’s from voting on an amendment to stop the next PM from proroguing parliament for a no deal Brexit has done little for the prospect of avoiding a disorderly Brexit. In addition to the pound taking a hit, tourism stocks such as TUI, IAG and easyJet fell over 3%.
FTSE traders will look towards UK GDP data and Federal Reserve Powell’s testimony for direction. A weak GDP reading could drag the pound to fresh 2 year lows which could offer support to the FTSE. Should Powell focus on the risks facing the US economy, US rate cut expectations could rise boosting stocks across the globe. The FTSE could be pushing above 7600 sooner rather than later.