UK stocks start the week on the back foot

23 January, 2017

The FTSE100 is under some selling pressure this morning and trading lower by around 40 points. The leading UK stock index posted its first weekly loss in over a month on Friday and has continued lower out the gate today. The pound is broadly higher on the day and has moved back above the 1.24 handle against the US dollar.

Banking stocks lead the fallers

Several of the worst performing stocks on the FTSE 100 come from the banking sector with RBS, Lloyds and Barclays all firmly in the red this morning. Paddy Power is also under pressure and lower by 2% after the bookmaker blamed football results in December and Donald Trump’s unexpected US election win for losses of around £40m in the final quarter of 2016. The ongoing uncertainty surrounding President Trump has seen Gold prices remain well-supported today and the rise can be seen in Antofagasta and Fresnillo, with stocks sensitive to the price of bullion sitting at the top of the index. In general, risk appetite has waned in recent sessions as market participants are taking a more measured approach in contrast to the “get-me-in-anywhere” attitude that contributed to the strong rally at the tail-end of last year and spilled over to the start of 2017 in driving stocks to record highs. This isn’t to say that the FTSE is set for a significant correction but the record-breaking run has come to a fairly abrupt halt and traders will be closely monitoring developments on both sides of the Atlantic in an attempt to determine the path of least resistance going forward.

Oil lower despite positive meeting of producers

Benchmarks for crude oil are also lower today, despite seemingly positive developments over the weekend. OPEC said it was near its target of cutting production by 1.8 million barrels of oil per day, just under two months after the deal was agreed upon. Countries not in the cartel have also promised to curb output to stabilise the market and comments from the Russian Energy Minister following the first meeting of a committee set up to monitor the deal suggest that both OPEC and non-OPEC countries have made a strong start in delivering on these. Alexander Novak described the deal as a success and stated that all countries are sticking to their quotas, which has led to results above his expectations. In addition to positive noises coming from the group, the US dollar is also depreciating today with a drop in the buck giving crude in dollar-denominated terms a de facto boost, but still failing to send price higher.

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