FTSE Gains Erased in Topsy-Turvy Day

FTSE Gains Erased in Topsy-Turvy Day

17 May 2016, 18:23
Roberto Jacobs

FTSE Gains Erased in Topsy-Turvy Day

  • FTSE punishes those chasing early gains
  • US CPI raises chance of June hike
  • UK manufacturing in decline as prices fall

An impressive batch of US data has helped compound equity weakness that had one foot in the European stock markets today. It is often the times of greatest confidence that you should be worried and that will be a lesson learnt for those buying into early FTSE strength, only to see the index tumble 1% in just four hours. Going into tomorrow’s big FOMC focused risk event, today’s unpredictable price action will no doubt erode confidence in the recent rally.

Today’s US CPI reading has seemingly resuscitated the notion of a June rate hike, with the market probability of a rise doubling from 4% to 8%. A three-year high for month-on-month US inflation stood in stark contrast to the UK figure which tumbled despite rising fuel prices. Clearly the chance of any action from the Fed is a long shot, yet with the inflation side of the argument now improving, a strong June payrolls number could spark a strong resurgence of hike expectations.

Manufacturing remains in the doldrums both home and abroad, with UK producer prices in deflation, as US manufacturing production falls for the second consecutive month. Despite the desire to diversify the UK economy, a sub-50 reading for UK the manufacturing PMI reading, coupled with falling producer prices points towards an industry in decline. June cannot come sooner for manufacturers, as the threat of annexation from our largest export market will do little to inspire confidence across the sector.


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