Where we are: The FTSE 100 is trading marginally higher at 10447, up 0.18% on the day. This modest gain sees it holding above yesterday’s New York close, carving out a tight range in early European trading. Overnight action saw a mixed picture across Asia and Europe, with the Nikkei and DAX showing notable weakness, while the CAC managed a small uptick. The current intraday price action suggests a degree of resilience, shrugging off some of the broader European malaise.
What’s driving it: The domestic picture remains the primary anchor for the FTSE 100, with inflation figures showing a steady 2.8% YoY for CPI in May. While core CPI ticked up slightly to 2.6%, the overall print suggests a lack of immediate inflationary pressure that would force the Bank of England’s hand. This stability allows the index to absorb external headwinds, such as the firmer US Dollar Index (DXY) at 101.73 and the significant drop in US 10-year yields to 4.447%. The market is clearly focused on the BoE’s stance, with Megan Greene’s CV and questionnaire for the Treasury Select Committee published, signalling ongoing scrutiny of monetary policy direction.
- UK CPI YoY holding at 2.8% in May, providing a stable domestic inflation backdrop.
- US 10Y yields falling sharply by 1.02% to 4.447%, offering a potential tailwind if it translates to a broader risk-on sentiment.
- Segro’s surge over 15% following a rejected takeover bid is a significant idiosyncratic driver, boosting sentiment within the real estate sector and potentially the broader index.
NY session focus: The New York session opens with US macro data still to print, which will be the key catalyst. Traders will be watching for any signs of weakness in US employment figures or inflation, which could exacerbate the current fall in US yields and provide further support to global equities. Key levels to watch for the FTSE 100 are the 10450 immediate resistance, with a break above potentially opening up the 10500 psychological level. Conversely, a sharp reversal in US risk sentiment or a hawkish surprise from the Fed could see the index test the 10400 support. The trade that’s working is long Segro, while the trade at risk is any sustained weakness in US yields without a corresponding risk-off move. The pain trade for this asset would be a sharp reversal in US yields coupled with a hawkish Fed surprise, forcing a re-pricing of domestic rate expectations.