Where we are: The FTSE 100 is currently trading around 10,330, down roughly 0.5% on the session. The index has traded in a tight 40-point range so far today, failing to find sustained momentum in either direction. It’s below yesterday’s New York close and struggling to hold above the 10,300 psychological support level.
What’s driving it: The Footsie is under pressure due to a combination of factors, primarily stemming from domestic banking sector concerns and escalating geopolitical tensions. NatWest’s warning about the potential £140m hit from the Iran war is weighing heavily on sentiment, overshadowing slightly better-than-expected pre-tax operating profits. Elevated UK inflation, as evidenced by the March CPI print of 3.3%, is also a concern, limiting the scope for near-term dovish surprises from the Bank of England despite the MPC holding rates steady at 3.75% yesterday.
- NatWest impairment charge of nearly half of £283m stemming from Iran war fallout.
- UK CPI climbed to 3.3% in March, up from 3.0% previously.
- House price growth slowed to 0.4% in April, defying expectations of a steeper decline, suggesting some resilience in the housing market.
NY session focus: With no major UK data releases scheduled for today, the FTSE 100 will likely take its cues from US market sentiment. Watch for any escalation in Middle East tensions which could further dampen risk appetite and drive flows into safe-haven assets. Key levels to watch are 10,300 as immediate support and 10,400 as resistance. The trade that’s working is shorting banking stocks on any rallies. The trade at risk is long energy, as a deeper risk-off move could pressure crude oil prices despite the naval blockade of Iranian ports. The pain trade is a sudden de-escalation in geopolitical tensions, triggering a sharp relief rally and catching shorts off guard.