Where we are: The FTSE 100 currently trades at 22421, down 164 points or -0.72% on the session. Intraday, we’ve ranged from 22390 to 22584, failing to hold yesterday’s New York close. The index continues to suffer, marking what could be the seventh consecutive day of losses should this weakness persist into the NY session.
What’s driving it: UK CPI figures released last month continue to weigh on sentiment, with the March print showing a rise to 3.3% YoY, exceeding expectations and increasing concerns about persistent inflation. This has pushed UK gilt yields higher, with the 2-year yield up 4bp to 4.450% and the 10-year up 2bp to 5.007%, adding pressure to equities. The potential for a rent freeze proposed by Rachel Reeves is also impacting the market, particularly buy-to-let mortgage lenders.
- UK CPI YoY jumped +0.30 to 3.3% last month, spooking the market about inflation.
- Shares in buy-to-let mortgage lenders are under pressure following the UK rent freeze report.
- US 10Y yields at 4.364% continue to offer competition to equities.
NY session focus: The NY session will be focused on how the market digests the higher gilt yields and their impact on UK financials. Keep an eye on the S&P 500 futures, currently down -0.58%, as overall risk sentiment will bleed into the Footsie. Key levels to watch are 22300 as immediate support and 22500 as resistance. The trade that’s working is shorting UK financials, particularly those exposed to the buy-to-let market. The pain trade would be a surprise dovish shift from the BoE repricing, triggering a short squeeze.