After spending much of the day in the red, a stronger start on the Dow and bid interest in Shire (LON:SHP) Pharmaceuticals pushed the FTSE higher. Shire is up over 17% on the day amid confirmation of preliminary interest from Japanese Pharma Group Takeda (T:4502).
The bid interest from Takeda comes hot on the heels of GlaxoSmithKline (LON:GSK) buying out Novartis (NYSE:NVS) from a consumer health joint venture, resulting in a 6.5% rally for pharmaceuticals over the past 5 days and a 7% rally for the sector across the past 30 day, outperforming the FTSE, which sunk 2.9% over the same period.
The FTSE is now back across the key psychological 7000 mark. However, with the tech stock selloff threatening sentiment again on Wall Street, the FTSE is starting to look vulnerable again. A break through resistance at 7025 would be needed for the bulls to push the index back towards 7070, before targeting 7150.
UK Retail sales decline sharply
GBP/USD weakness this afternoon is offering some support to the FTSE. The pound came under pressure after CBI data showed that retail spending declined sharply for the first time in 5 months in March. Investors, already feeling the strain from the challenging financial climate, found freezing weather conditions and transport disruptions a good excuse to keep away from the high street, sending to CBI index to -8, down from 8 in the previous month.
Falling retail sales will do little to boost the case for a May rate hike from the BoE. However, given the retail sales are notoriously volatile, today’s data unlikely to weigh too heavily on sentiment, especially given optimism surrounding easing inflation and improving wage growth.
US GDP beats forecast at 2.9%
The dollar is building on gains from the previous session after US GDP data surprised to the upside. The US economy grew a whopping 2.9% in Q4, revised upwards from 2.5% and beating expectations of 2.7% growth. Strong economic growth supported by upwardly revised consumer spending and solid jobs growth will boost expectation of the Fed raising rates in June, boosting the dollar, even more so given the reading doesn’t include any benefits from the tax cuts.
GBP/USD holding at $1.41
GBP/USD is down 0.4% hitting strong support at $1.41. A meaningful break through here could see the pair target support at $1.4065 before heading lower to $1.40. However, should earlier reports of an imminent solution by the UK to the Irish border issue prove correct and markets consider it a plausible solution, the GBP/USD could find itself on the front foot once again, targeting $1.4150 before $1.4200.
Tech stock selloff continues
Traders continue to rotate out of tech stocks, preferring to sit on the side-lines with so many regulatory questions remaining unanswered. Traders will want to have more clarity over where the Facebook (NASDAQ:FB) data mismanagement scandal is heading and what the resultant regulatory clampdown will look like, not just for Facebook, but for the sector as a whole before any serious buying interest is likely to pick up. The Nasdaq is trading 0.7% lower, whilst the Dow is trading 0.2% higher in early trading.
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