FTSE falters despite commodity comeback

Joshua Mahony MSTA Scope Markets

Amid a strong batch of US bank earnings, and a rebound is the likes of gold and crude, FTSE has suffered thanks to a strong sterling rebound

FTSE stumbles despite commodity resurgence
US banks beat, yet investment banks look set to suffer
US data further beats the dovish drum

The FTSE has spent the day in the red, with early declines being built upon thanks to a surge in the price of sterling. Gold meanwhile is on track to enjoy one of its best days in over a month, with the lessening expectations associated with future rate rises giving way to a relief rally for the precious metal. It is the commodity firms which have attempted to stem today’s losses, as gains across the likes of gold and crude feed through into company valuations.

Earnings season got off to great start for US banks, with the likes of Citigroup, Wells Fargo and JP Morgan all releasing impressive figures for Q2. However, the breakdown proved of great interest, with a strong consumer sentiment and helping drive profits, erasing the losses seen in their trading revenues. The lack of volatility seen of late means we are likely to see the investment banks underperform vs those with a consumer focus to their business. Thus while we have seen Wells Fargo, JP Morgan and Citigroup outperform today, we have seen a sharp selloff for investment banks such as Goldman Sachs.

A raft of poor economic data from the US is going to do little to disprove this week’s hot topic of Janet Yellen’s perceived dovish comments which drastically altered market expectations of future rate rises. Whilst the Fed likes to utilise the core PCE price index as their preferential measure of inflation, today’s sharp drop in US CPI is will certainly grab the attention of Yellen & co.

Author

Joshua Mahony MSTA

Scope Markets

Joshua Mahony is Chief Markets Analyst at Scope Markets. Joshua has a particular focus on macro-economics and technical analysis, built up over his 11 years of experience as a market analyst across three brokers.

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