Where we are: The FTSE 100 is currently trading at 22914, up 437 points or 1.95% on the day. The index is trading near the upper end of today’s range of 22477-23058, and has sharply outperformed the prior NY session.
What’s driving it: The primary driver for the FTSE’s surge appears to be a significant drop in UK 2-year gilt yields, currently down 12bp to 4.358%. This is supportive of UK equities overall. Additionally, global risk sentiment is supportive, with US futures pointing to a positive open in New York. The weaker DXY, currently at 97.79, is also providing a tailwind.
- UK 2Y yields down 12bp, boosting sentiment toward UK equities.
- Diageo’s sales boost, driven by strong performance in Latin America, is supporting the consumer discretionary sector within the FTSE 100.
- The FTSE 100’s relative strength versus European peers (DAX +1.16%, CAC 40 +2.08%) suggests specific domestic drivers are at play.
NY session focus: The NY session will likely focus on whether the risk-on sentiment can persist. Watch for the 08:30 ET US data prints as a potential catalyst. Key levels to watch on the FTSE are the 23000 psychological barrier and the day’s high at 23058. A sustained break above 23058 could trigger further upside, while failure to hold above 22800 could signal a pullback. The current trade is leaning long, but it’s vulnerable to a hawkish surprise from US data. The pain trade is a reversal of the risk bid, triggering a rapid unwind of the FTSE’s gains and a sharp spike in UK gilt yields.