The FTSE fell steadily across the course of the session, diving sub 7200 before climbing towards the close. The index was weighed down by a combination of a weaker oil price, a stronger pound and a large sell off in WPP (LON:WPP) and Evraz (LON:EVRE), although a rally in the US on the open helped lift the FTSE into the close. Investors concentrated on putting the US led military bombings against Assad’s regime behind them and fortunately there is plenty for them to focus on.
WPP down 6% on future leader uncertainty
There was little doubt that WPP was the big equity story of the day. Shares in WPP were down over 6% on the day as investors respond to CEO Martin Sorrell’s resignation amid an investigation into allegations of personal misconduct. Whilst his resignation is not expected to trigger an immediate crisis at the advertising agency, there is a certain level of uncertainty from the lack of succession planning which is making investors nervous.
BoA beats expectations
As fears over an escalating conflict in Syria eased, US stock markets rose. The Dow is trading 200 points higher with investors turning their attention to corporate updates and earning season. Bank of America (NYSE:BAC) joined the likes of Blackrock (NYSE:BLK), JP Morgan Chase (NYSE:JPM) and Citigroup (NYSE:C), reporting better than forecast earnings thanks to loan growth and lower corporate taxes. The bar has been set high for the earning season in the US, with 17.3% increase in first quarter earning expected. The problem being when the bar is set high, potential for disappointment can also run high.
Pound aiming for YTD high ahead of UK jobs data
The pound had continued to climb higher versus the dollar, pushing comfortably through $1.43 and peaking at $1.4337 as it targets $1.4345 the year to date high. With no high impacting UK data US retail sales numbers were in focus. After three months of falling retail sales in the US, sales finally rebound increasing by 0.6% in March, beating expectations of 0.4% and ahead of February’s decline of 0.1%. However, even stronger than forecast US advanced retail sales have failed to halt the sterling rally as investors grow increasingly optimistically over a more hawkish BoE whilst looking ahead to tomorrow’s jobs data.
Whilst UK unemployment is due to remain constant at 4.3%, average earnings are expected to increase to 3% in the three months to February. Given that inflation was at 2.7% in February, we could see earnings overtake inflation, which would reduce the pressure on the consumer who has been squeezed by falling wages in real terms for many months. This could encourage a more hawkish BoE at the next MPC meeting in May.
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