FTSE pulls back from 11-month high; Lloyds tumbles

Summary:

  • FTSE lower after hitting highest level since August 2018

  • Central Bank decisions the key going forward

  • Lloyds Bank shares fall to 6-month low

 

The UK blue-chip index has pulled back further after hitting it highest level since last August yesterday with the global equities in general trading a little tentatively ahead of this evening’s eagerly anticipated Fed rate decision. The US central bank are expected to cut rates for the first time in a decade later on, but given the high expectations amongst market participants there is plenty of scope to disappoint. 

The FTSE has dipped lower today and erased a fair chunk of the gains seen on Monday. Global risk sentiment, as dictated by the reaction to the Fed, and the strength of the Pound remain key drivers for the market. Monday’s swoon in Sterling contributed to the surge higher but as the currency has stabilised, the stock market has pulled back. Source: xStation 

 

For an example of how this could play out, a look at the reaction in the German stock market to last week’s ECB decision could provide a template. President Draghi disappointed markets with the Governing Council’s latest communication and the German Dax has seen two large down days of around 200 points in the 4 full sessions since. Stocks here in London could see their wings clipped after this latest foray higher should the Fed disappoint and spark a sell-off on Wall Street.    

 

Lloyds Bank tumbles back to 6-month low 

One of the worst performers on the FTSE 100 today is Lloyds Bank with the stock dropping more than 4% after the release of its latest trading results. A half-year profit of £2.23B is not a bad return in itself, but it does still represent a decline of 4% on the corresponding period last year. Underlying profit remains pretty solid and lower restructuring costs are a definite plus but these have been offset by yet another large provision for the misselling of PPI (£550M) and this continues to be a large millstone around the neck of Lloyds. 

 

The stock has been under pressure in recent sessions before gapping sharply lower today and with the prospect of a no-deal Brexit increasing there could be more pain to come for shareholders. Lloyds role as the UK’s largest mortgage lender leaves it exposed should there be even anything near the sort of house price shock that some have feared while a slowdown in economic activity would hit the bank’s loan book too.

Lloyds Bank shares have dropped back to near the level where they started the year as investors sold out following the latest trading update. Source: xStation 

 

 

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