Retailers, strong pound hit FTSE
The FTSE moved lower across the session, weighed down by retailer woes and a stronger pound, overshadowing strong gains in energy stocks as oil surges. The index is moving precariously close to the psychological level of 7000, a drop below here, could see the index target 6978 before 6919.
Could retailer woes be about to turn a corner?
Retailers dominated the lower reaches of the FTSE as harsh winds continue to blow down the UK high street. Kingfisher (LON:KGF), the biggest decliner, dropped over 9% after reporting a 10% fall in revue; another retailer falling victim to consumers tightening their purse strings.
Whilst conditions remain beyond challenging for retailers, today we saw first signs that things could start to get easier going forward. UK wages increased in January at a faster rate than prices rose in February, should this pattern continue then as from this month, the consumer should no longer be experiencing a wage drop in real terms. This means that spending on non-essential items could be on the cusp of spinning around, which would offer some respite to embattled retailers. Although for some, such as Mothercare (LON:MTC), Carpetright (LON:CPRC) this could be too late.
Oil charges higher
Energy stocks were underpinning the FTSE after news that US oil stock piles unexpectedly dropped last week, lifted crude to a 6-week high, adding to the previous sessions 2.7% rally. US inventories dropped by 2.6 million barrels last week, rather than increasing by the 3.2 million barrels forecast. Prices are also being underpinned by speculation that the US could enforce fresh sections against OPEC member Iran.
Wall Street higher as FOMC in focus
Energy stocks and optimism surrounding the Fed decision later this evening has given Wall Street a bumper start to trading. The Dow is up over 100 points whilst the S&P 500 has gained 0.4%. Even troubled Facebook (NASDAQ:FB) was seen to be finding its feet again, up over 2%, despite Mark Zuckerberg remaining silent over the latest data mismanagement scandal.
Traders are solely focused on tonight’s FOMC rate decision, before they will quickly move to obsessing over the forward guidance and the dot plot. We already know that Powell is more upbeat over the US economy than in December; yet as gradualism is expected to remain the name of the game, will Powell consider a rate rise and a more aggressive path to rate hiking as too much for the markets to deal with in one hit?
GBP/USD has held onto its wage increase inspired gains throughout the day, as investors now focus on the Fed, its first (expected) rate rise in 2018 and the dot plot for the remainder of the year. The pair has so far failed to push meaningfully through resistance at $1.4070. Any signs of hesitation from Powell and Co. could see the pair extend gains ahead of the BoE rate decision tomorrow. However, a hawkish tone from the Fed could see GBP/USD break back below the key level $1.40.
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