FTSE on the flatline ahead of Theresa May’s plan B
The FTSE recovered quickly from a dip on the open, rising to just shy of 7000, before moving back to the flat-line. Oil majors offered support to the FTSE thanks to stronger oil prices.
Multinational consumer goods stocks were also in favour whilst the pound was weaker. However, as the pound pared losses in the afternoon, multinationals lost the benefit of the preferential exchange rate and the FTSE drifted back to break even.
Concerns over the health of the global economy kept pressure firmly on European bourses on Monday. Whilst Asian markets had bucked the trend and moved higher, European stocks and US futures were less buoyant following Chinese GDP figures. The Chinese economy expanded at its slowest annual pace since 1990 as the US – Sino trade war and policy decisions from Beijing impacted on consumer confidence.
Given the importance of the Chinese consumer for global brands, a lowering of confidence would be expected to hit international firms sharply.
The US is closed for a public holiday, so the FTSE won’t have Wall Street dictating its direction this afternoon. This means that Brexit and Theresa May’s Pan B will take centre stage.
No big changes expected from Theresa May’s plan - B
The pound kicked off the week on the back foot ahead of Theresa May’s unveiling of Brexit Plan – B. Expectations for any major changes are very low. There is a rising suspicion among traders that Plan B will look a lot like Plan A. We are expecting another push at getting reassurances from Brussels over the Irish backstop and not much else.
The Plan B is due to be debated and voted on 29th January. Should the deal fail to make it through the House of Commons traders will hope that an extension to Article 50 will quickly follow. Otherwise the UK will be crashing out of the European Union just 2 months later with no deal.
House builders fall on Rightmove data
House builders were noticeable decliners following disappoint house price data. According to Rightmove, house prices grew at the slowest pace since 2012 as Brexit uncertainty knocks consumer confidence. House prices price just 0.4% year on year in January, sending the likes of Taylor Wimpey (LON:TW), Berkeley Group (LON:BKGH) and Persimmon (LON:PSN) 2% - 1.6% lower.
Euro steady despite weak German PPI
Sticking with the forex markets, there was more bad news for Germany and the eurozone. The German producer price index, which measures inflation at factory door level, declined by -0.4% month on month, well below the -0.1% drop from the previous month.
With data in Germany and the eurozone consistently falling short of expectations the ECB could struggle to convince the market that it is still considering raising rates later this year when it gives its announcement on Thursday. The euro was holding steady versus the dollar.
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