The FTSE charged higher on Tuesday, extending gains ahead of its European peers. With Burberry leading the way after an impressive Q1 trading update and the tanking pound offering support, the FTSE was aiming for a second straight positive close after a run of seven consecutive losing sessions.
Burberry’s new designer well received
Burberry rallied over 12% after sales exceeded expectations. Investors were looking to use the Q1 results to assess whether new designer Ricardo Tisci had been well received by consumers since taking over from Christopher Bailey. He didn’t disappoint. Like for like revenues were up 4%, double the growth that had been expected. This was a good quarter for the firm as they continue to overhaul the business.
Pound tanks on Brexit fears
The pound was also offering support to the multinationals on the FTSE. The pound plummeted to 27 month low despite U.K. wages growing at the fastest pace in 11 years. Whilst the UK labour market continues to show signs of strength the pound was focused solely on Brexit and the increasingly likely prospect of a no deal Brexit. With both Boris Johnson and Jeremy Hunt, the finalists in the Conservative leadership contest, both hardening their stance on Brexit and particularly the Irish backstop, a no deal Brexit is starting to look inevitable.
Banks are a mixed bag
Wall Street opened in a muted fashion as investors digested a mixed bag of corporate results from the banks. Goldman Sachs, JP Morgan and Wells Fargo reminded investors of the uncertainties that linger over the economic outlook and the negative impact that a rate cut could have. JPMorgan, as did Citigroup yesterday, saw interest margins slip. This is serving as a reminder that lower interest rates could hurt the lending side of the business more so if the Fed starts cutting rates. Given that the consumer side of the business is performing better than the markets side, the outlook is concerning. So far banks’s earnings have not done enough to dispel concerns over the outlook.
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