- UK stocks pullback from 6-month highs
- RBS slumps as profits fall
- US growth figures in focus
Despite rallying to a 6-month high on Tuesday, the FTSE is set to end lower for a second successive week as the benchmark continues to wrestle with some resistance around the 7500-7550 region. In the FX space it’s been a pretty mixed week on the whole for the pound, although a further appreciation in the greenback has sent the GBP/USD rate to its lowest level since February around the $1.29 handle.
The FTSE has pulled back from a 6-month high this week and the region below 7550 continues to attract sellers. Source: xStation
RBS slumps as profits fall
The worst performing blue-chip in London this morning is RBS, with shares in the bank falling more than 4% as it reported a drop in profits and reiterated its Brexit warning. While profits for the first quarter fell to £707M, this was actually better than consensus forecasts of around £546M, but weak revenues and forward guidance that could be described as cautious at best have caused the adverse reaction. Revenues of £3B were flat on the year, but lower than the £3.3B predicted and comments from RBS that this is unlikely to improve imply are not what investors wanted to hear. With the government still owning a 62% stake in RBS, the news isn’t good for public finances and with CEO Ross Mcewan announcing just a day before that he is stepping down there’s heightened levels of uncertainty around the stock going forward - and that’s without even looking at potential impacts from Brexit!
US growth figures in focus
The main scheduled event for the market before the week is out comes from the US this afternoon, with the world’s largest economy set to announce their latest growth figures. GDP releases suffer from sizable lags in terms of their release and are prone to numerous revisions but nonetheless they can move markets. An expected annualised pace of growth for the first quarter of the year at 2.1% is pretty good compared to most of its peers, and a reading around this level or higher would provide further evidence of the relative outperformance of the US and further support the US dollar which hit its highest level in almost two years this week. Stock markets could also be watching this release closely and after a strong start to the week risk sentiment has waned somewhat as we come to the end of what is traditionally the best 6-month period for equities recognised by the “sell-in-May” trading adage.