The FTSE, has shed a chunk of its Monday’s US-inspired rise after falling half a percent. Part of the UK index’s morning slump stems from Rolls-Royce, which posted the largest loss in its history – a whopping £4.6 billion – after settling bribery and corruption charges.
Sterling appears to be a little tentative at the moment, though yesterday it managed to cross 1.18 against the euro while holding strong above 1.25 against a Trump-boosted dollar.
Wall Street’s four main indices once again closed at record highs yesterday. Financial sector strength helped the Dow Jones Industrial Average and S&P 500 to rally by 0.7% and 0.5% respectively as hopes of Donald Trump’s reformation of tax laws attracted bulls and Apple posted a fresh all time high, while the Nasdaq and Russell 2000 also finished firmer by 0.5% and 0.3% respectively.
The undoubted focus this morning is on the UK’s latest inflation reading. The figure is expected to come in at 1.9%, a fraction under the Bank of England’s self-imposed 2% target. However, it could well cross that marker, as in 5 of the past 7 months the CPI has beaten forecasts by around 0.1%. Despite being the cause of inflation’s climb, the pound seems pretty pleased at the prospect of the BoE’s target being hit. as it will increase the chances of a Bank of England rate hike.
The second reading of Q4 Eurozone GDP is released later this morning. It’s expected to show no change from the preliminary reading two weeks ago. However, this could be influenced by the German GDP reading at 7am should the earlier figure surprise to either the up or downside. Also released will be the Eurozone Industrial Production figures, seen declining month-on-month while slowing year-on-year, and German ZEW Surveys which are expected to fall back slightly in February.
Later on today, US Producer Price Inflation will be closely watched for any indication of Trump’s trade relations policies bearing fruit, especially given the rally in US equities over the past two days. However, this may be overshadowed by a quadruple helping of Fed speakers, including Chair Janet Yellen, speaking to US Congress in her semi-annual address to lawmakers.