FTSE On Course for Another Green Day

FTSE On Course for Another Green Day

7 June 2016, 12:26
Roberto Jacobs

FTSE On Course for Another Green Day

The FTSE 100 is trading in positive territory once more this morning, with the index moving to its highest level in over a month and looking on track to post another day of gains. The breadth of the rally is a further indication of the current positive sentiment for stocks, with the majority of the benchmark’s components involved in the latest leg higher. The pound is also appreciating this morning, gaining ground against all its major crosses.

Shell tops the gainers

Shares in Royal Dutch Shell are the best performing out of all UK blue-chip stocks so far, rising more than 2% after the international oil company gave investors an update on its long-term strategy prior to the market open this morning. The main talking point was steeper than planned cost cuts, in an attempt to reduce the company’s debt burden that has escalated since the BG deal was announced - the initial reaction from the market suggests this has been warmly received. Not far behind in a list of the gainers are Next and Burberry, with the retailers also firmly higher on the day.

Sterling continues to surprise

Despite recent polls swinging in favour of leaving the EU, financial markets seem remarkably nonplussed with the pound failing to depreciate substantially even as the threat of a potential Brexit looms larger over the the UK. This could be explained in part by a lack of faith in the polls - which, let’s remember were inaccurate and misleading in the run up to last year’s general election - or even that should the UK leave the EU, the outcome wouldn’t have as greater adverse effect on economic activity as the remain camp suggest. If neither of the prior hold true then a final explanation for the strength despite potential headwinds could be complacency, which in itself is worrying and would mean the pound is presently extremely vulnerable to a large move lower should the recent polls be correct and a leave vote prevails. At this point in time it’s impossible to say which of these three reasons - lack of faith in polls, over exaggerated Brexit risks or complacency - is the driving force behind the pound strength, but it’s hard to imagine any of them waning significantly before Britons go to the polls.


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