Weak Pound, Strong Earnings Boost FTSE

Weak Pound, Strong Earnings Boost FTSE

City Index  | May 16, 2018 16:46

Strong miners, a weaker pound and some impressive corporate earnings from the likes of Micro Focus and Burberry lifted the FTSE higher on Wednesday, as it flirted with its all-time high reached in January. However, a flat open on Wall Street and increasing geopolitical tension dampened spirits pulling the FTSE off its highs in the afternoon.

Micro Focus (LON:MCRO) hits top spot

The top spot on the FTSE was filled by Micro Focus following a revelation by the software provider that revenue is now expected to be above guidance in H1. Whilst this is primarily down to an usually large licence deal closing earlier than expected, excluding this deal revenue was towards the better end if the guidance anyway. Shares were up some 10% in early trade and are now just easing off those highs, in a complete turnaround of sentiment for the firm, which only in March experienced a huge sell off following the resignation of the then CEO and a warning over a revenue drop.

Burberry (LON:BRBY) impresses

Burberry was up over 3.5% following an upbeat corporate update. The market had set the bar fairly low for Burberry, given that it was in the midst of a top management turnaround. Still the luxury brand pulled it out of the bag reporting a rise in full year profits in addition to a new £150 million crowd pleasing share buyback.

Sterling fails to hold $1.35

The pound has been unable to pull itself out of the doldrums following a month of weak data, a dovish Bank of England and growing concerns over the health of the labour market. Whilst the bulls retook $1.35 this was not only short lived but also more of a story of fleeting dollar weakness, rather than any serious pound strength.

Dollar hits fresh 5 month high

King dollar continues to reign strong, on track for its third straight session of gains. With stronger than forecast industrial production figures and housing permits overshadowing weaker housing starts, plus 10-Year treasury yields at 3.07, the dollar is moving comfortably higher, recovering from a brief slip up on the releases. With no further data due, investors will look ahead to tomorrow's initial jobless claims.

Dow Struggles for Direction

The Dow is struggling for direction in early trade, as increased geopolitical tensions plus high yields fight against solid growth and earnings from the likes of Macy’s (NYSE:M). It is not all that surprising that North Korea’s Kim Jong Un has pulled out of talks with South Korea and threatens to do so with Trump as well. It was all going a bit too smoothly for it to be believable. Whilst the move is weighing on sentiment for equities we haven’t seen an increased flow in safe havens, in short the market will probably just shrug this off.

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.

Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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