The FTSE was under pressure on Tuesday, led lower by the banks after from Swiss UBS’s poor earnings. Oil majors also acted as a drag on the index as global growth concerns weighed on oil prices. A weaker open for Wall Street and a stronger pound aggravated the sell off further.
UBS off 4%
Banking stocks dominated the loser board after earnings from Swiss UBS (SIX:UBSG) missed expectations. UBS reported profits for the fourth quarter. However, they came up short compared to expectations.
The Swiss bank is blaming slowing economic activity and geopolitical tensions for the miss caught traders’ attention and feeds straight into current market fears. UBS dropped over 4% after suffering client outflows in the region of $13 billion. Barclays (LON:BARC), RBS (LON:RBS) and HSBC (LON:HSBA) all traded over 1.5% lower.
Oil dips 2.4%
Oil majors sold off on Tuesday tracing the price of oil lower. Oil prices declined on global growth fears; the same fears that have pulled Wall Street lower at the start of trading.
Concerns over global growth are refusing to go away, the most recent catalyst being the IMF cutting its global growth forecasts for 2019. Citing risks including a slowing Chinese economy and Brexit, the IMF sees global growth experiencing a sharp decline in 2019.
UK wage growth strongest since ‘08
The pound moved higher versus the dollar and the euro, supported by strong UK wages data and hopes of a second Brexit referendum. The pound rallied to $1.2928 after data showed that wage growth had moved up to its highest level since the financial crisis in 2008. Wages unexpectedly increased to 3.4% in the three months to November, up from 3.3% the month previous.
With inflation back to the BoE’s target 2%, households are experiencing a decent increase in real terms. This should aid consumption. The data is all the more impressive given the current Brexit uncertainties.
Second referendum hopes lift pound
Increased optimism of a second referendum was also lifting sterling, as Labour moved closer to backing a second referendum to halt the political deadlock over Brexit. Jeremy Corbyn has tabled a motion that would give Parliament the right to vote on whether to give the public a final say.
Pound traders are sensing that the Brexit mood continues to shift away from a no deal scenario. A cliff edge Brexit would be the most damaging to UK business, the economy and therefore the pound. The more other options, such as a delay of Article 50 or second referendum are explored, the more beneficial for the pound. As we are seeing traders slowly start to price in the possibility of Brexit not happening, the pound hit a session high of $1.2935.
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