The FTSE was once again outpacing its European peers on Thursday. Stronger miners and a Brexit hit pound, overshadowed weaker banks, housebuilders and retailers. A higher start on Wall Street also helped the FTSE remain comfortably above 7300.
Gold at 3 week high
Stronger metal prices, particularly gold lifted the miners, with Fresnillo racing to the top of the FTSE leader board. A more dovish Fed boosted demand for the yellow metal which struck a three-week high of $1320.05. With the Fed now signaling 0 rate rises across 2019 and the markets pricing in an almost 40% probability of a rate cut by the end of the year, according to the CME Fed Fund Watch, the future for god looks bright. Gold often rallies when the prospect of inters rates decrease. This is because the opportunity costs of holding a non-yielding asset such as gold declines with lower rate.
Pound drops amid Brexit drama
The pound was extending losses on Thursday, trading a further 0.5% lower versus the dollar. For the third time this week investors ignored solid UK economic data, distracted by Brexit drama. Retail sales show that UK consumers continued spending in February, despite Brexit uncertainties increasing. The stronger wage growth that we have been seeing is also translating into more consumer spending, even with Brexit just around the corner. The retailers on the FTSE struggled failed to take advantage of the encouraging retail sales report, instead weighed down by declining profits and stores at bellwether Next.
As expected, there were no fireworks from the BoE, who continue to sit on their hands offering little in the way of future guidance whilst Brexit remains unresolved. The weaker pound supported the usual suspects in the FTSE; the multinationals that earn abroad, which profit from the more beneficial exchange rate.
Dax extends losses
The Dax had a bad day on Wednesday, sliding 1.5%. Bayer shedding 12%, experiencing its worst daily loss since 2003 and BMW dropping 4% on a profit warning hit the index hard. Thursday isn’t shaping up much better for the Dax, which is down over 0.7%. The German index is typically more sensitive to trade headlines. President Trump announcing that he intends to keep tariffs on China for a substantial period, has also weighed on sentiment for the index. The President’s comments poured cold water on hopes that the two nations will roll back tariffs as part of the deal. Finally the ECB economic bulletin heighted concerns over the outlook for the eurozone region, with slowing growth momentum remaining a key factor.
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