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FTSE falls on global equities selloff: Here’s how 5 City analysts reacted

Shares slid this morning as global equities markets reacted ..

Shares slid this morning as global equities markets reacted to worrying data coming out of the US on Friday.

In the UK, the FTSE 100 fell 1.2 per cent, its biggest fall since August last year – while sterling was pushed lower by a disappointing outlook for the UK's services sector, with the purchasing managers' index (PMI) falling to its lowest since 2016.

Here's how City analysts reacted.

Read more: DEBATE: Will Janet Yellen’s departure signal a shift in US monetary policy?

1. Dour economic picture

"The dour UK economic picture painted by last week’s construction and manufacturing surveys has been confirmed after a sharp fall in the services completed a hat-trick of PMI disappointments. With the latest PMI surveys pointing towards [first-quarter] growth rate of 0.3 per cent, yet with the economic picture looking increasingly gloomy, at least this will lessen the chances of multiple rate hikes in 2018.

"Unfortunately for the Brexit brigade, today’s weak UK services figure came as the eurozone services PMI a decade high and manufacturing remains within touching distance of record highs."

– Joshua Mahony, IG

2. Equity storm but not a full-on correction

"Wall Street freaked out over that wage data on Friday and the Dow’s 660-pt collapse then has been the cue for Asian and European markets to trade lower.

"What kind of correction is this? So far, the Dow is off about five per cent from its all-time highs and it all looks reasonably orderly (a much overdue correction for many) in as much as there are no big risk-off moves in FX. The yen actually weakened against the dollar last week – if we are to see a major risk-off collapse in sentiment we should expect to see the yen gain ground, not lose it. Gold has also eased off recent highs as the dollar has picked along with rising yields.

"So for now it’s an equity storm, created by the pressure from bonds, but still a fairly localised one. We’ll have to see the Dow back at 24,000 for this to be a full-on correction."

– Neil Wilson, ETX Capital

3. Ugly scenes

"There were ugly, ugly scenes after the bell, as the market-wide sell-off gathered pace on fears that global interest rate are, sooner rather than later, going to be heading higher.

"It shows the extent of investors’ jitters that the FTSE has fallen so dramatically this Monday despite the pound itself being in the red."

– Connor Campbell, SpreadEx

4. To be expected

“The relentless rise in US Treasury bond yields across the curve continues. Equities are finally beginning to take notice and in addition there is some concern that America’s central bank will hike borrowing costs more aggressively than expected. Some analysts are talking about four 25 basis point interest rate increases this year, compared with the two to three currently being priced in by the market.

"The start of the week has been a mirror image reversal to the optimism expressed in the start of the year… After such a great performance some meaningful pullback is to be expected."

– Mihir Kapadia, Sun Global Investments

5. To be expected

"It was all looking so good for UK stocks just over a fortnight ago with new all-time highs an almost daily occurrence.

"The speed at which the outlook has deteriorated can be described as somewhat alarming with a decline that began with currency effects due to an appreciation of the Pound has blown into a pretty large scale sell-off.

"Investors will hope that this drop finds the requisite buying support to halt its decline with any significant further downside threatening to derail the rally that began in the days following the Brexit vote back in the summer of 2016."

– David Cheetham, XTB

Original Article





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