Markets were in more positive spirits on Friday. Higher than expected inflation data has unwound some of the global growth concerns brought about by its ugly trade data.
The FTSE 100 has extended its Thursday afternoon recovery to regain the 7,000 threshold.
Sensitivity to the pound is playing its part in the stock market gains. European Council President Donald Tusk saying Britain faces a choice of a “Hard Brexit or no Brexit” and US banks looking to uproot from London to Paris according to French Finance Minister Michel Sapin have both weighed on Sterling. The drop in the currency is supporting UK stocks.
This week has clearly seen sentiment wobble but stock market investors are still in dip-buying mode. Since the Brexit bounce began, a string of four down-days in a row has been few and far between. A decline of three days or more has generally preceded a new high.
Tesco (LON:TSCO) shares are topping the UK equity benchmark, while Unilever (LON:ULVR) shares are near the bottom after the two firms reached an agreement over “Marmite-gate”. It seems that in the war that has erupted between supermarkets and their suppliers because of the weaker pound, Tesco has won its first battle. Unilever seems to have caved in to limit the PR damage incurred by its popular products like Marmite and Hellman’s Mayonnaise not being available to customers.
The writing is on the wall though. Suppliers are clearly in the mood for renegotiation because of impact of the weaker pound on margins, and the supermarkets won’t win all the battles. It’s inevitable that while the pound remains weak, retail prices are headed higher, just as UK supermarkets were staging a fight back against discounters.
US stocks look set to open higher.
Concerns about the next US rate rise pre-and-post this week’s FOMC minutes have played a big role in the stock market correction. A speech from Fed Chair Janet Yellen this afternoon could give a more up-to-date economic assessment from the Fed.
Bank earnings will be front and centre for US investors. Bank shares dipped on Thursday after Wells Fargo (NYSE:WFC) Chief Executive John Stumpf stepped down with the bank at the centre of a political storm over the creation of fraudulent customer accounts.
USA pre-opening levels
S&P 500: 6 points higher at 2,138
Dow Jones: 58 points higher at 18,156
Nasdaq 100: 10 points higher at 4,813
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