Where we are: The FTSE 100 is currently trading at 23418, up 249 points or 1.07% on the day, holding near the intraday high of 23419. The index has rallied steadily through the European session, outperforming its continental peers, trading above Friday’s close after yesterday’s Bank Holiday. The FTSE 100 has thus far traded in a range of 23169 to 23419.
What’s driving it: UK equities are catching a bid as Gilt yields remain relatively stable despite slightly lower inflation prints last month. CPI came in lower than expected, fueling speculation that the Bank of England might adopt a more dovish stance sooner than anticipated, but without provoking a sell-off in Gilts. The FTSE’s outperformance is further supported by strong gains in specific sectors like banking and mining, benefiting from a catch-up move after the bank holiday closure. The dip in US yields adds another layer of support, as the US 10Y is currently at 4.486%
- UK CPI YoY fell to 2.8%, a significant drop from the previous 3.3%, hinting at easing inflationary pressures.
- Kingfisher (B&Q) jumped as much as 8.3% following a positive trading update, lifting the broader retail sector.
- BP shares are down over 4% following news that its chair was removed due to governance concerns, presenting a stock-specific drag on the index.
NY session focus: Look for the FTSE 100 to track broader risk sentiment during the US session, specifically watching the direction of the S&P 500 futures, currently down 0.24%. Key levels to watch are 23450 as initial resistance and 23300 as initial support. The trade that’s working is long UK banks and miners, while short BP is at risk of a short squeeze if the stock stabilizes. The pain trade would be a sharp reversal in Gilt yields coupled with a broad risk-off move in US equities.