The FTSE 100 is up by more than 0.70% as traders react to the upbeat inflation data from the UK and the improving economic situation in the country. The index is trading at £6,232, which is slightly below the intraday high of £6,252. Other bourses in Europe are also rising, with the DAX index gaining 77 points and CAC 40 rising by 45 points.
London banks disappoint
While the FTSE 100 is up today, a closer look at the laggards shows that banks are among the worst-performing. HSBC share price is down by 0.60% while RBS stock has declined by 0.54%. Similarly, Standard Chartered and Lloyds bank shares have eased by more than 20 basis points.
The reason for this underperformance is the ongoing bank earning season in the United States. Yesterday, results from some of the biggest banks in the country sent shockwaves around the world after they allocated billions to provisions. JP Morgan, Wells Fargo, and Citigroup collectively allocated $28 billion to cover losses as consumer and companies continue to default on their payments.
These provisions are significantly higher than what they allocated in the first three months of the year. In a statement, JP Morgan, the biggest bank in the country prepared for higher unemployment rate. The firm set aside $10 billion to cover for these losses while Citi allocated $7.9 billion while Wells Fargo set aside more than $9 billion. As a result, the latter bank made its first loss in more than a decade.
Therefore, investors seem to believe that UK banks will also be affected by the surge in provisions.
Meanwhile, the FTSE 100 is also reacting to the weak Burberry earnings. As I have just reported, the retailer said that its same store sales declined by 45% in the first quarter. Other top laggards in the FTSE 100 index are Imperial Brands, Sainsbury, Morrison, British Land, and Land Securities Group.
Best performers in the FTSE 100
International Consolidated Airlines is the best-performing stock in the FTSE 100 today. It is up by more than 4% even after the European Union said that it will not expand its lost of countries allowed to enter the block. Rolls Royce share price has jumped by 4.24% while Melrose share price has risen by 3.7%. Other top gainers in the FTSE 100 are Intertek Group, AVEVA, and Scottish Mortgage Investment Trust.
FTSE 100 technical outlook
The daily chart below shows that the FTSE 100 index is up for the second straight day today. Also, it has moved above the ascending trend line shown in pink. Most importantly, it has moved above the 50-day and 100-day exponential moving averages and above the 50% Fibonacci retracement level. Therefore, by crossing all these milestones, I expect that the FTSE 100 index will continue to rise as bulls attempt to test the next resistance at £6,400.
On the flip side, a move below £6,012 will invalidate this trend. This price is the lowest it has been since July 10.