Financial market research and analysis

Whilst Wall Street finished lower, dragged southwards by a weak tech sector and increasing fears over rising interest rates, the FTSE is looking to charge higher on the open, thanks to the significantly weaker pound.

A disappointing forecast from a major Asian chipmaker sent jitters through tech stocks on Wall Street, pulling the likes of Apple down some 2%. Meanwhile investors were also keeping an eye on runaway US treasury yields, which sparked a correction in the US equity markets just a few months ago. With the 10-year yield once again approaching 2.9 nerves are starting to show, as a higher interest rate environment could dampen the positive outlooks being provided by firms in earnings season so far. The Dow closed 83 points lower, the S&P closed down 0.6% and the tech heavy Nasdaq 0.8% lower.

Carney Sends Sterling sub $1.41

A hattrick of softer than forecast UK economic data across the week saw the pound drop from post Brexit highs of $1.4377 to $1.4160. Surprises to the downside for wage growth, inflation and retail sales meant that traders spent the week debating whether the Bank of England’s Spring rate rise was still on the table. Last night BoE Governor Mark Carney put an end to the debate saying that markets should not bet on a May rate rise.

Mark Carney’s comments that there are other central bank meetings where a rise could take place was more than a gentle reminder, this was a stern warning that markets had not been considering the recent economic data carefully enough. Markets have been running away with themselves whilst inflation is in actual fact moving back towards the BoE’s target rate of 2% and Brexit uncertainties could also delay any hikes.

The pound ended Thursday 0.85% lower against the dollar, diving through $1.41 to current level of $1.4080. With no high impacting UK data due for release sterling will look towards BoE policy makers Michael Saunders for any further clues when he speaks at 09:30 this morning. However, Brexit developments could also create some volatility for sterling making $1.40 a realistic target.

UK Irish Border Solutions Rejected

The rejection by the EU of Teresa May’s alternative for a hard border with Ireland casts fresh doubts over whether the UK will be able to leave the customs union. The UK government will have to go back to the drawing board after all solutions put forward have been rubbished by the EU. May has repeatedly promised that there will be no hard border with Ireland, yet Brexit without leaving the customs union is also being considered a betrayal of the Brexit referendum. With time ticking, May’s options are looking increasingly limited, particularly in light of the defeat in the Lords earlier in the week over an amendment to the EU Withdrawal Bill.

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