Industry Comment: FTSE Weakens As Reopening Reaches Limit

Joshua Mahony, Senior Market Analyst at IG, discusses pressures on reopening of FTSE.

“The FTSE 100 is under pressure, with the reopening push coming into question in the UK. US earnings season has been largely positive given low expectations. The dollar has staged a rebound, while gold continues its surge into fresh highs.

“UK equity markets are kicking off another week with the same old concerns holding back sentiment despite notable gains throughout China and Japan.

“The admission that the UK has reached the limit of its reopening process has raised fears for investors in companies such as Cineworld that are yet to recommence operations.

“We are also seeing the likes of Mitchells & Butlers on the back foot, after recent warnings that school reopening may have to come at the expense of a second wave of pub shutdowns.

“US earnings season looks set to take a bit of a breather this week, with the focus shifting back to the UK. With 63% of the S&P 500 having reported their Q2 numbers, we have seen a huge 82% of those companies beat market estimates for earnings.

“On the revenue front, the fact that 68% of firms have exceeded revenue forecasts does go to highlight why we have been seeing a relatively elevated S&P 500 despite huge concerns over a potential second wave and volatile election up ahead.

“The dollar decline that has dominated the FX world over recent weeks appears to be fading, as the greenback stages a recovery of sorts. Coming off the back of a two-year low for the dollar index, we are starting to see traders take stock over whether we have gone too far, too fast.

“Meanwhile, precious metals are yet again in the limelight, after gold hit yet another record high in early trade.”