Where we are: The FTSE 100 is currently trading around 8,235, extending losses from yesterday’s close. The index has been under pressure in European morning trade, testing its six-week low, within an overnight range of roughly 8,210 – 8,280. This level is significantly below the prior NY close, indicating substantial negative sentiment.
What’s driving it: Domestic political uncertainty is the primary driver, weighing on investor confidence. Rising pressure on Prime Minister Starmer after weak local election results has fueled concerns about political stability, overriding any positive signals from recent macro prints showing sticky inflation. While UK CPI remains elevated, with the headline at 3.3% YoY in March, and unemployment showing a slight dip to 4.9% in January, these figures are secondary to the immediate political headwinds. EQT’s ‘final’ offer for Intertek is providing some minor support, but is not enough to offset the broad market weakness. Falling US 10Y real yields could be seen as a constructive macro tailwind but the domestic uncertainty overrides that.
- More than 70 Labour MPs are reportedly calling for Prime Minister Starmer to outline a timetable for his departure.
- The FTSE 100 banks are seeing significant declines, with HSBC, Lloyds, Barclays, NatWest, and Standard Chartered all retreating.
- Despite reporting earnings ahead of expectations, Vodafone shares are down over 2.5%.
NY session focus: The US session will likely exacerbate existing trends, with risk sentiment heavily influenced by the political situation in the UK. Focus will be on how US equities react to the ongoing political risks, but the Footsie’s trajectory will largely be shaped by domestic factors. Watch for a potential test of the 8,200 level, a break of which could trigger further selling. Any positive news regarding UK political stability could provide a short-covering rally. The trade that’s working is shorting UK banks. The pain trade for the FTSE 100 is a sudden resolution to the political turmoil coupled with a resurgence in global risk appetite.