The FTSE joined global equities moving higher on Tuesday. Supported by oil majors and miners, as well as a firmer start on Wall Street, the FTSE rose for a seventh straight session. The UK index is experiencing its longest winning streak since May 2017, despite the Brexit mayhem.
Oil
Heavyweight oil stocks traced the price of oil higher in early trade. Oil rose towards fresh 4 month highs on Tuesday although US crude encountered resistance at $60, a level not yet breached this year. Tighter supply amid continued output cuts from OPEC and Russia, in addition to sanctions on Iran and Venezuela has offered support to oil; meanwhile signs that US production is stalling has also helped oil push northwards.
Wall Street extends gains
US stocks hit a five-month high in the previous session and continue to climb higher today as investors bet on a more dovish Fed. The Fed’s dovish U-turn in January has helped fuel a rally in equities, as an accommodative policy is more supportive of growth. Investors are expecting the Fed to keep their fingers firmly on the pause button for hikes and cut their outlook for interest rate rises across the year. The CME Fed Watch shows the market is even pricing in a 27% probability of a rate cut by the end of the year.
As the dollar declined, gold bonded higher on dovish Fed expectations. Gold successfully pushed through $1300, hitting a high of $1310.75, before easing lower. A lower interest rate environment reduces the opportunity cost
Pound steady despite impressive labour data
The pound was little changed despite impressive UK labour data. UK unemployment unexpectedly fell to 3.9% whilst wages remained steady at 3.4% for a second month. With inflation at 2.1% households are enjoying strong wage growth in real terms. The labour market continues to defy Brexit uncertainties, outperforming whilst other metrics paint a significantly more dismal picture of the U.K. economy.
BoE in focus
Today’s numbers will increase pressure on the BoE to consider hiking rates. The central bank’s hands have been tied over Brexit. However, with continued uncertainty over Brexit, the BoE’s outlook is no clearer. The latest Brexit headlines points to the U.K. looking at a long extension, meaning Brexit could continue to cloud the outlook for some time. Investors will be looking to the BoE monetary policy announcement on Thursday for further clarification.
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