FTSE to end the week near record highs

It’s been another strong week for the leading UK stock market with the FTSE 100 now within striking distance of its all-time high. The pound has come back under some pressure this week with several economic releases weighing on the value of sterling.

Pound falls back on economic data

An unexpected 0.3% decline in UK retail sales for January saw the pound hit with a wave of selling just after 9:30 this morning, with the GBPUSD rate briefly dropping below the 1.24 handle to trade down near its lowest level of the week. The release was the third data point of the week that has contributed to overall weakness in the pound, with lower than expected inflation and average earnings figures keeping the currency offered for most of the week.

Wall Street set for record weekly close

All three of the major US stock benchmarks have posted all-time highs this week, much to the delight of President Trump who tweeted his joy at the run yesterday. It has been yet another eventful week for the new president who has continued to attack several branches of the media and yesterday gave a press conference that was one of the most bizarre seen in living memory. In terms of macroeconomic drivers from across the Atlantic the residing feeling remains one of strength, with monthly retail sales and initial jobless claims both delivering strong readings. Fed chair Yellen took a hawkish turn in her testimony before a senate committee in Washington on Tuesday and due to this, and a strong pick-up in inflation indicators, the market implied probability for a rate hike at the next Fed meeting in March rose. Despite this the US dollar has failed to show a significant appreciation and is fairly mixed overall on the week. Ten-year yields rose earlier in the week on these developments but they have fallen back once more heading into the weekend, which has provided a boost for Gold and Silver with the latter posting a  three-month high.

Unilever rejects takeover bid

The rise in stocks across the pond has been followed to some extent in London with the FTSE 100 higher by approximately 15 points on the day largely thanks to a 13% jump in Unilever’s stock. The consumer goods company has seen its share price soar after becoming the subject of a $143bn takeover bid from Kraft Heinz, a food conglomerate backed by Brazil’s 3G and Warren Buffet. Whilst the bid of $50 per share has been subsequently rejected there is some belief that there could be further offers in the not too distant future. Taking the current GBPUSD exchange rate the bid represents a premium of around 6% on the last traded stock price and suggests there could be more upside ahead.    

Banking sector weakness ahead of earnings reports

There is some notable weakness seen in banking stocks today with Standard Chartered off by almost 4%, whilst Barclays and Lloyds are also firmly in the red. These shares have been in the spotlight recently and with the latest earnings figures set to be released next week there could be some heightened volatility going forward. Miners are also seeing some selling with Anglo American, BHP Billiton and Rio Tinto looking set to end the week on the back foot. Elsewhere it’s been a week to forget for Rolls Royce shareholders after the manufacturing company experienced a sharp decline after posting a record loss on Tuesday and the stock is down by a further 2% today.

Oil inventories continue to rise

The weekly crude oil inventory figures from the Department of Energy (DOE) showed another substantial rise on Wednesday with an increase of 9.5m barrels. Whilst this reading is lower than the 13.8m seen last week it is still the second highest since early November and suggests that the supply glut in crude is persisting. Comments from OPEC yesterday that the output deal could be extended saw a brief rally that fizzled out without much follow through, while Brent Oil is approaching the lower bound of its recent range. The crude benchmark has been in a remarkably narrow trading range for the past two months but the failure of the OPEC supply cuts - which this week were shown to have a surprisingly high level of compliance - to cut stockpiles will come as a worrying development for oil bulls.