FTSE sinks into the red

Heading into the close, the FTSE 100 has given up its gains, as Wall Street takes a bearish turn.

  • FTSE stumbles after strong morning
  • Euro weakness helped along by Draghi
  • Ocado dives but Prudential finds favour

US markets have turned southward in early trading, dragging down European and UK markets from their session highs. Weaker US retail sales and a more downbeat Atlanta Fed GDP forecast have prompted some classic risk-off moves, as the dollar moves broadly higher, except against the yen, where the 2018 downtrend has picked up speed again. Equities could have been fine in a world of strong US growth, even if this risked higher inflation, but now even that prop risks being kicked away. The hope in this case would be that weaker growth will hold the Fed back from too many rate hikes, but would investors really prefer looser policy if the corollary was lower growth too? In Europe markets have been
 aided by a weaker euro, as Mario Draghi reiterated that the bank was in no hurry at all to cut back on accommodative policy. Inflation has still to reach a level which the ECB finds comfortable, so all the talk of further tapering has been for naught. Combine that with the possibility that the hawkish Weidmann may see his ambition to succeed Super Mario dashed due to German political manoeuvring, and the bear case for the euro just got a bit stronger.

Ocado had been riding high of late thanks to hopes of a deal in the US but it looks like this has been dashed as the US giant Wal-Mart looks to expand its offering directly, rather than using the UK firm as a partner. Short positions got cleaned out months ago when the first international deals came through, but some of the cynicism is returning, with shorters adding to their bearish position on the stock. Meanwhile, the separation of Prudential into an Asian-focussed firm and a Europe-centred one has been on the cards for some time. This way investors get to be a bit more choosy about which one they pick, and can now decide for themselves whether they want high-growth and a bit more risk,
 or a more staid operation that will likely be a better candidate for dividend investors. Either way, the corporate activity has been cheered by the market, with the shares up almost 5% today.

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