Extra Losses Probably on UK Political Turmoil

FTSE 100 value, information and evaluation:

  • The FTSE 100 index seems to be prone to underperform different main inventory market measures.
  • That’s due, at the least partially, to political issues engulfing the UK Prime Minister.

FTSE 100 index could underperform

The FTSE 100 index of main London-listed shares will probably underperform the opposite main world indexes as political turmoil within the UK undermines confidence. Late Tuesday, practically 100 Members of Parliament from the ruling Conservative Occasion rebelled in opposition to the Authorities on the difficulty of Covid passes in England.

The measure introducing them was handed with help from the opposition Labour Occasion however the vote nonetheless undermined the authority of Prime Minister Boris Johnson, who’s already underneath assault on points starting from who paid for the refurbishment of his Downing Avenue flat to reviews of events final Christmas in opposition to the Covid guidelines then in drive.

Such political instability is mostly not acquired effectively within the markets, and whereas the FTSE 100 index was solely marginally decrease in early Wednesday commerce, additional losses could be no shock.

FTSE 100 Value Chart, One-Hour Timeframe (December 8-15, 2021)

Latest FTSE 100 price chart

Supply: IG (You possibly can click on on it for a bigger picture)

UK inflation soars

This political turmoil is including to financial considerations highlighted by the most recent UK inflation information, which my colleague Nicholas Cawley reviews on here. The figures have been considerably worse than anticipated, with headline inflation as much as 5.1% yr/yr in November – its highest for greater than 10 years.

That’s additionally unhealthy information for UK shares because it may immediate the Financial institution of England to extend rates of interest Thursday, though that’s unlikely because the BoE worries concerning the financial restoration being slowed down by the Omicron coronavirus variant. Even when it doesn’t increase charges, a hike is probably going early subsequent yr.

Retail dealer information bearish too

As for the IG positioning figures, the most recent retail dealer information present59.16% of merchants are net-long the FTSE 100, with the ratio of merchants lengthy to quick at 1.45 to 1. The variety of merchants net-long is 10.63% greater than yesterday and 51.13% greater than final week, whereas the variety of merchants net-short is 11.88% decrease than yesterday and 33.61% decrease than final week.

Right here at DailyFX, we usually take a contrarian view to crowd sentiment, and the actual fact merchants are net-long suggests the FTSE 100 could proceed to fall. Merchants are additional net-long than yesterday and final week, and the mixture of present sentiment and up to date adjustments offers us a stronger FTSE 100-bearish contrarian buying and selling bias.

— Written by Martin Essex, Analyst

Be at liberty to contact me on Twitter @MartinSEssex

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