UK Markets Stabilize Amid Economic Uncertainty and Policy Shifts:

Image Source : Krish Capital Pty Ltd

Macro Update:  Britain's Labour government is set to announce cuts to welfare spending for people with disabilities and long-term health conditions, aiming to curb rising costs ahead of the March 26 fiscal statement, where economic challenges from lower-than-expected growth will take center stage. The OECD has downgraded the UK’s growth forecast for 2025 to 1.4% from 1.7%, highlighting concerns for finance minister Rachel Reeves as she prepares her budget update. Meanwhile, Britain and the EU are strengthening their stance against Russia, with discussions in London on increasing economic pressure and supporting Ukraine. Tech companies in the UK must now enforce stricter measures to combat online criminal activity under new regulatory oversight. In the defense sector, QinetiQ warned of delays in contract awards in the UK and U.S., citing policy shifts following recent government changes.

Commodity Update: The U.S. dollar remained near a five-month low against the euro and other major currencies on Tuesday, weighed down by concerns over escalating global trade tensions. Fears that President Trump's tariff policies could spark an economic slowdown have dampened investor sentiment, impacting the dollar. In the commodities market, gold rose 0.50% to $3,021.10, silver gained 0.57% to $34.51, and copper edged down 0.15% to $9,851.10. Brent crude climbed 0.40% to $71.33 after Israeli airstrikes in Gaza, but oil struggled for substantial gains as investors remained cautious ahead of the Federal Reserve's policy meeting.

Our Stance: U.S. stocks rebounded for a second consecutive session as investors sought bargains after a prolonged market slump, though economic uncertainty remains high due to weaker-than-expected retail sales and a sharp decline in New York State factory activity. While February’s retail sales showed a slight recovery of 0.2% following January’s steep 1.2% drop, they fell short of forecasts, reflecting the impact of tariffs and federal job cuts on consumer sentiment. Oil prices gained amid geopolitical instability in the Middle East and China’s economic stimulus plans, though concerns over global growth and Ukraine ceasefire negotiations capped gains. Meanwhile, in Europe, investors await a German parliamentary vote on increased state borrowing aimed at revitalizing the region’s slowing economy. Overall, while short-term market optimism persists, structural economic challenges, including trade policies, employment uncertainty, and geopolitical risks, continue to weigh on global sentiment.

FTSE 100

The FTSE 100 is trading at 8,720.20, showing a modest gain of 0.46% on Tuesday and forming a bullish candlestick pattern. Following this strong reversal, the index is positioned above both the 21-period and 50-period Simple Moving Averages (SMA), which provide key support levels. This setup suggests the potential for further upward momentum in the near term. The index is holding above a crucial horizontal support level, indicating a possible shift towards bullish sentiment after recent lows. The Relative Strength Index (RSI) stands at 55.61, signalling mild bullishness with further upside potential. While market uncertainty persists, short-term traders may find opportunities near support levels, with momentum shifts being pivotal in determining if the recovery will continue or if a decline resumes.

Data Source - Refinitiv