FTSE 100 on the rise despite UK economic concerns

• FTSE 100 on the rise despite UK economic concerns.
• Waller calls for July rate cut.
• UoM survey ahead, with consumers seemingly in good shape.

The FTSE 100 continues to prove that the stock market is not the economy, with rising unemployment, a black hole in the public finances, and resurgent inflation pressures doing little to dampen sentiment for the UK’s top stock index. Nonetheless, to an extent the greater clarity the UK provides over the trade relations with the US do bring a degree of safety for traders seeking refuge from potential volatility as we close in on the 1 August deadline. Oil and mining stocks are leading the way thus far, with growing optimism around a potential US-China trade deal helping to lift demand forecasts across the commodity sphere.

Federal Reserve member Christopher Waller once again made a pitch to distinguish himself from the rest of the FOMC, reiterating his belief that the Fed should be cutting rates in July. With the end of Powell’s tenure drawing ever closer, this appears to be a strategic push to demonstrate that he is willing to take a more proactive approach to easing despite the obvious risks ahead. Those risks are centered around inflation, with tariff levels expected to drive prices higher in the second half of the year. Nonetheless, with Waller claiming that rates should be 125-150bp lower, he is clearly taking a hard-line view that is focused more on economic strength than price stability.

Looking ahead, traders will be focusing in on the latest Michigan consumer sentiment and inflation expectations survey, with year-end inflation expectations forecast to drop for the second month in a row (to 4.7%). Coming hot off the heels of yesterday’s higher retail sales and lower jobless claims figures, a strong consumer sentiment survey would likely reiterate Powell’s point that the economy is stable enough to hold off on rates for a little longer.