Where we are: The FTSE 100 is currently trading at 22749, down 101 points or 0.44% on the day. The index is trading towards the lower end of its intraday range of 22742-22850, failing to hold ground after the brief overnight bounce. It is underperforming European peers, which are seeing slightly less dramatic declines, and is looking vulnerable as it tests intraday lows.
What’s driving it: The primary driver of the FTSE’s weakness is the spike in UK gilt yields. The UK 10-year gilt yield has jumped 7 basis points to 5.001%, reflecting concerns about persistent inflation after stronger-than-expected CPI prints in March showed headline inflation at 3.3% and CPIH at 3.4%. The lack of progress on core inflation, remaining steady at 3.2%, suggests that domestic inflationary pressures remain sticky. Global factors are secondary, but US 10-year yields holding steady at 4.393% isn’t offering any relief, while a slightly stronger DXY around 97.87 adds some minor headwinds.
- UK 10Y Gilt yield at 5.001% (+7bp) — a clear signal that fixed-income investors are demanding higher compensation for inflation risk.
- UK CPI remains elevated, with the headline number climbing to 3.3% YoY.
- FTSE underperforming DAX and CAC 40, suggesting UK-specific concerns are at play.
NY session focus: With no major UK data releases scheduled, the FTSE will likely be driven by broader risk sentiment and US market movements. Watch for any signs of stabilization in gilt yields, which could provide some support. Key levels to watch are 22700 as immediate support and 22850 as resistance. A break below 22700 could trigger further selling. The trade that’s working is shorting the FTSE on any rallies. The trade at risk is long FTSE, hoping for a quick turnaround. The pain trade would be a sudden dovish shift from the Bank of England, reversing the yield spike and triggering a sharp rally.