FTSE Starts February on the Front Foot After Ending January Lower

January saw the Dow & the S&P post the biggest monthly gains since March 2016 and the Nasdaq since October 2015. The FTSE, however, was not so fortunate, losing ground over the month, as nervousness in the outsourcing sector weighed on the index, following the liquidation of Carillion and a 45% drop in the share price of Capita.

However, FTSE has started February off on the front foot, taking the lead from a positive finish in the US overnight. The UK index is finding support from commodity stocks as industrial metals and oil prices are broadly higher, meanwhile housebuilders were also gaining ground in early trading following strong house price data.

House prices increase ahead of expectations

The nationwide price index showed that house prices increased 3.2% compared to a year earlier in January up from December’s 2.6% and, beating forecasts of a slight slowdown to 2.5%. Whilst there have been on going concerns over the health of the UK housing market in the face of Brexit uncertainties, today’s figures suggest that those fears could be overdone. The house builders have rallied on the back of the release and the pound has also rebounded strongly.

GBP/USD surged over 80 points driving straight through resistance at $1.4180 and the psychological level of $1.42 to its current levels of $1.4250. Attention will now turn to manufacturing pmi released later this morning. Manufacturing activity is expected to have increased to 56.5 in January, an uptick from 56.3 in December. Solid numbers could push the pound towards $1.43 before US data takes focus in the afternoon.

Profits at Shell double

In corporate news, Shell saw full year profits more than double as its recovery continues. The group beat expectations posting earnings of $15.8 billion for 2017, up from $7.2 billion in 2016. The strong results come after a year of transformation within the group, increased optimism over global growth and the rally in the price of oil.

The price of oil surpassed $70 per barrel for the first time in three years, as OPEC oil supply cuts, declining US crude inventories and a weaker dollar have supported the rise, making for a more accommodating environment for the oil producers, such as Shell.

Shell’s results also showed the group was hit by a $2 billion charge in Q4 from the US tax reform. However, they have also said that they expect the tax reform to be beneficial going forwards.

Despite the upbeat release shares in Shell dropped over 1% in early trade.

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