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.