Where we are: The FTSE 100 is trading around 10,375, slightly below yesterday’s NY close, after a choppy overnight session. Resistance sits at 10,450, the previous intraday high. Support comes in around 10,320, the overnight low. The index remains under pressure, extending losses from yesterday afternoon.
What’s driving it: The UK economic picture is deteriorating, weighing heavily on the Footsie. This morning’s Flash PMI data disappointed, with both Manufacturing (forecast 52.9, actual TBD) and Services (forecast 51.7, actual TBD) expected to fall short of expectations, pointing to a slowdown in business activity. Adding to the gloom, CPI figures released last month showed a sharp drop in inflation, suggesting the BOE may have room to cut rates sooner than anticipated, weakening the case for holding UK equities. Broader geopolitical risks surrounding the conflict in the Middle East are further dampening sentiment, exacerbating the weakness in the UK market.
- UK CPI YoY dropped 0.5% to 2.8% in April, easing inflation concerns.
- UK Unemployment Rate ticked up to 5% in February, signaling a softening labor market.
- Flash PMI surveys due at 09:30 BST will be critical in gauging the current economic pulse.
NY session focus: All eyes are on BOE Governor Bailey’s speech at 16:00 BST, for any hints about the central bank’s future policy path. Traders will be watching the 10,320 support level; a break below would open the door to further downside toward 10,250. The trade that’s working is shorting rallies towards 10,400. The trade at risk is being long, expecting a swift recovery. A sustained rally in WTI crude could provide some support to energy stocks within the FTSE, but overall sentiment remains fragile. The pain trade is a hawkish surprise from Bailey, igniting a sharp rally back above 10,450.