The UK’s FTSE 100 index closes at record highs, whilst sterling takes a battering.

Jan 11 • Morning Roll Call • 2095 Views • Comments Off on The UK’s FTSE 100 index closes at record highs, whilst sterling takes a battering.

FTSE100The UK’s main index, the FTSE 100, has recently enjoyed its longest winning streak since 2011, printing record highs on each day. Although on closer inspection, it becomes apparent the rise is not necessarily performance driven. Due to the majority of the listed 100 companies being American, quite simply the plummeting pound (down circa 20% since June 2016) increases their profitability, hence the index rises.

As investors await president elect Trump’s first official press conference in a (semi) official capacity on Wednesday, USA markets and indeed the dollar’s valuation, appear to be in the doldrums, waiting for direction. The post election rally may have run out of steam, alternatively, should Trump follow through on his record breaking fiscal stimulus promise, USA indices and the dollar could rise, over the short to medium term. Many analysts are reporting a real feel good factor out there in small town America.

That sentiment improvement has been reflected by the USA small business sector, in which a survey soared in December, printing the highest rise witnessed since 1980. The National Federation of Independent Business’s index rose by 7.4 points in December reaching 105.8, the highest point seen since the end of 2004. Seventy three percent of the advance was due to upbeat views over sales and the economy. Small companies represent more than ninety nine percent of all U.S. employers, therefore the survey carries some weight.

In other USA data published on Tuesday wholesale inventories rose by 1%, versus a prediction of 0.9%, whilst JOLTS (job openings data) rose marginally at 5522, ahead of expectations of 5500.

The SPX was unchanged at 2,268.90 in New York, erasing the earlier 0.5% advance. The DJIA closed at 19,855, falling 0.16%. The UK’s FTSE 100 closed up 0.52%, Germany’s DAX up 0.17%, France’s CAC up 0.01% and Italy’s MIB up 0.33%.

The Dollar Spot Index rose by 0.1% on Tuesday. USD/JPY fell for the second day, down by 0.3% to 115.74. GBP/USD flirted with its lowest level since Oct. 25th, before rebounding to trade little changed on the day at 1.2170. EUR/GBP rose to 0.8679 on the day, before sliding to 0.8667. EUR/USD hit an eleven day high of 1.0626 in early trading, before ending the New York session close to 1.0551.

West Texas Intermediate crude dropped by 2.2% to reach a three week low, due to rumours that U.S. crude supply is rising, whilst Iran appears to be increasing production, therefore breaking with the consensus for compliance by OPEC (and non OPEC members) on the promised production cuts. Oil slumped to $50.82 a barrel after plunging by 3.8% on Monday.

Gold futures added 0.1% to finish close to $1,185.50 an ounce, the highest level seen since Nov. 29th. Demand continues to rise ahead of the Chinese New Year.

Economic calendar events for January 11th 2016, all times quoted are London times

There is a raft of UK official performance metrics and data published on Wednesday morning at 9.30. We’ve highlighted those considered to be of a high impact nature. Naturally, sterling’s value could be effected as a consequence of this series of publications from the UK’s ONS.

09:30, currency effected GBP. Visible Trade Balance (NOV). The anticipation is for the UK’s trade balance situation to have deteriorated recently to -£11100, from the previous reading of -£9711.

09:30, currency effected GBP. Manufacturing Production (MoM) (NOV). After a previous slump of -0.9%, the expectation is that the UK’s manufacturing production numbers will have swung back into positive territory, with a positive reading of 0.5%.

09:30, currency effected GBP. Manufacturing Production (YoY) (NOV). With a return to a positive monthly reading, the prediction is for the annual figure to have increased to 0.4% from -0.4% previously.

15:00, currency effected GBP. NIESR Gross Domestic Product Estimate (DEC). Whilst not the official ONS, the NIESR survey for the UK has gravitas. Analysts polled are predicting a rise to 0.5%, from the previous level of 0.4%.

15:30, currency effected USD. DOE U.S. Crude Oil Inventories (JAN 6). Naturally with the oil price falling to circa $50 a barrel, traders will be watching for signs of an inventory build up in the USA.

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