Trump livens up the afternoon

Heading into the close, the FTSE 100 is 30 points lower, with markets around the globe in retreat.

-       Long equity trade unwinds spectacularly
-       IAG flys high
-       Utilities back on top on Wall Street

The morning sell-off has been reversed to some extent, as a surprise speech from President Donald Trump once again brings up the topics of wall-building, stimulus programmes and tax reform. US markets in particular have recovered most of the losses sustained in the immediate aftermath of the open. In Europe markets are firmly off their lows, with the FTSE 100 back above 7240 after a brief dip below 7200. However, the London market remains firmly in the red, thanks to losses for big banks and mining stocks. Risk is firmly out of favour today; with so many all long stocks, it means the risks to the downside have markedly increased, with snowball selling gathering pace. Healthy gains for IAG have not been enough to tilt the balance in the bulls’ favour, with the shares climbing to their highest level since the Brexit vote. In a time of rising economic growth, the flag carriers look to have the advantage over their budget rivals.

Despite a small bounce from the opening lows, the S&P 500 continues to exhibit the characteristics seen over the past week. High yield, safe stocks like utilities and consumer staples are in high demand, while banks and other riskier stocks continue to fall. This is the interest rate trade in action – as market expectations of a March hike diminish, so will high yield stocks continue to gain in popularity.