FTSE ends lower ahead of no confidence vote, bearish bias in tact
The FTSE 100 ended lower on the day following the government losing the 'meaningful vote'. The top shelf index ended lower by 0.47% or by 32.34 points at 6,862.68, weighed by a stronger than expected pound considering the outcome of parliament on Tuesday.
The government lost the 'meaningful vote' on May's Brexit plan by a record margin of 432 to 202. This result spurred on the opposition party, Labour, and its leader, Jeremy Corbyn, to table a vote of no confidence in the government which takes place from any time after 1900GMT today. Markets expect May to won considering the DUP and hardline Brexiteers have guaranteed their backing. May said she will then open up Brexit negotiations to a cross-party approach which is why the pound is supported, on expectations that resolve will be found in time for the Brexit date. However, she will only have until the end of next Monday to put forward a 'plan B' on Brexit. However, Michel Barnier, the EU's chief Brexit negotiator, insisted on Wednesday that the deal that was rejected by parliament was still the "best compromise" that can be offered.
However, what would really give the market a boost would be if Article 50 was extended to give the UK more time to figure out plan B. Chancellor Philip Hammond suggested in a conference call with business leaders on Tuesday evening that the government was open to extending Article 50. However, Andrea Leadsom, Leader of the Commons, dismissed the possibility which means a no deal Brexit is still a real possibility. Speaking to the BBC, she said: "We're clear we won't be delaying Article 50, we won't be revoking it. What we need to do is to find a way that[Mrs May's deal or some part of it or an alternative deal that is negotiable can then be put to the European Union."
On the data front, the latest inflation figures from the Office for National Statistics showed inflation eased off as expected at the end of last year due to a drop in fuel prices and airfares. Headline consumer price index for year on year results fell to 2.1% from 2.3%. monthly CPI stayed at 0.2%, in line with consensus. Core CPI climbed unexpectedly to 1.9%, from 1.8%.
As for corporate highlights from the day, education publisher Pearson was a big loser in the index, expecting full-year profits to come in just above the middle of its target range and saying adjusted operating profit for 2018 will come in at around £540-545m, narrowing its range from the prior £520-560m. On the upside, housebuilders were the top performers. Bovis Homes said profits for 2018 are expected to be "slightly ahead" of market consensus following a "significant" improvement in its operational performance.
Best and worst Taylor Wimpey (TW.) 164.00p 5.64% came out on top, followed by Persimmon (PSN) 2,320.00p 5.41% and then Marks & Spencer Group (MKS) 287.00p 4.02%. the worst performers were Pearson (PSON) 918.20p -5.98%, then Reckitt Benckiser Group (RB.) 5,990.00p -4.19% and then Evraz (EVR) 460.00p -3.58%.
The FTSE remains below the key 38.2% Fibo retracement target of the May 2018 decline, located at 7041. A rally from there will open the runway to the 50% Fibo of the same range that is then located at 0.7204. Daily MACD remains less negative while RSI still has room to go on the upside. However, there is a bearish tint on the near-term readings, especially with the price below the pivot located at 6892. S1 guards S2 located at 6800 as a key psychological downside target on a break of th3 23.6% fibo located at 6839.