FTSE's bullish tide recedes

Chris Beauchamp IG

Heading into the close, the FTSE 100 is 20 points lower, as the UK's main index falls back even as others rise.

No love for UK stocks
Euro fails to bounce despite good PMIs
US earnings season provides good cheer

The FTSE's early gains have turned to ashes, with the index falling into the red over the course of the afternoon. Both the US and Europe have trimmed their gains, but the fall for London's chief index is the standout feature of the day. Now that the pound has stopped its freefall (for now at least), perhaps the index as a whole is beginning to look a tad overpriced. Certainly, it has shown little inclination to get back to its recent highs, with ongoing Brexit uncertainty making the UK less attractive versus a eurozone economy that appears, on the basis of today's PMI numbers, to be looking much more attractive. Indeed, the bounce in European economic data has done little for the euro, which remains close to seven-month lows; the impact of last week's ECB meeting still appears to be the chief driver.

A relative lull in earnings season today is merely the calm before the storm. With around 25% of the S&P 500 having reported, we can draw a few tentative conclusions, one of which being that the profits slump of past quarters appears to be over. Such steady growth should help to boost investor optimism, which remains stuck at remarkably low levels according to recent surveys.

Author

Chris Beauchamp

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