Where we are: The FTSE 100 is currently trading at 23377, down 52 points or 0.22% on the day. The index is holding above the lower end of its intraday range of 23352-23429, but is lagging the broader European rally. The Footsie closed its last NY session near 23,400.
What’s driving it: The FTSE is underperforming its European peers, feeling pressure from a somewhat mixed domestic picture. The latest inflation data, while showing a decrease in headline CPI to 2.8%, may not be enough to inspire confidence that the Bank of England will cut rates aggressively, particularly with unemployment ticking up to 5%. Meanwhile, a firmer dollar, with the DXY at 99.06, adds to the pressure, weighing on the relative value of FTSE-listed multinationals’ overseas earnings.
- UK CPI printed 2.8% YoY versus a prior of 3.3%, suggesting disinflation is ongoing, albeit more slowly than hoped.
- The UK unemployment rate edged up to 5%, a potential warning sign for the domestic economy.
- The FTSE is diverging from the DAX (+0.80%) and CAC 40 (+0.61%), pointing to specific UK-related headwinds.
NY session focus: The US session will be crucial in determining whether the FTSE can regain some ground. Keep an eye on US 10-year yields, currently at 4.452%, as any further downside pressure could provide a tailwind. The key level to watch on the FTSE is 23350 – a break below could trigger further selling. The trade that’s working is shorting FTSE versus long DAX, while the trade at risk is dip-buying UK housebuilders on the back of the Nationwide data. Watch for the 08:30 ET US data — any surprises could spark volatility across global markets. The pain trade for the FTSE 100 is a sharp reversal in Sterling alongside a renewed global risk-on move.