FTSE Spreads Weaken After UK Trade Deficit Unexpectedly Widens
Financial Market Comments from David Jones, Chief Market Strategist, IG Index.
In mid-morning trading shares in London have got off to a weaker start.
After an initially positive open, shares have turned lower with a worse-than-expected UK trade deficit number weighing on sentiment.
Expectations were for the trade gap to have narrowed to £7 billion, so an increase to £8 billion was something of a surprise.
Considering the continued weakness for Sterling over the past four months it was thought that exports would have picked up, but it is maybe too soon to expect this to start having any real effect.
On a more positive note, UK retail sales were up 2.2% in February, compared to a year ago, but this figure does perhaps paint a rosier picture than is the case in reality.
February 2009 was a particularly bad month due to the poor weather. In addition, last month may also have benefited from an artificial boost in retail activity as UK shoppers finally managed to dig themselves out of the January snow and hit the High Street.
Today is the one year anniversary for the current FTSE recovery. A year ago the FTSE 100 hit a low of 3460 and, by yesterday’s high, it had rallied by 62% from these lows.
This does demonstrate that the recovery is alive and well, although the market is starting to look vulnerable to at least some sort of correction from here.
Looking at the volumes recently seems to highlight an element of indecision creeping in.
As of yesterday, volume in London had declined for seven days on the trot, from just over two billion on 25 February to under a billion on Monday.
It would not be a surprise to see further gradual drift for shares from current levels, unwinding at least some of the strong gains seen over the past month. However, overall the medium-term outlook for the FTSE remains positive.
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Good Luck!
DB
The above comments do not constitute investment advice Clean Financial accepts no responsibility for any use that may be made of them.
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