Fiscal Strains and Rate Concerns Weigh on Global and UK Markets:

Image Source : Krish Capital Pty Ltd

Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went down around 1.04% on 22 May 2025. 

Macro Update: Britain's public finances remain under strain as April borrowing exceeded forecasts at £20.2bn, higher than economists' expectations, highlighting ongoing fiscal challenges. The government also faced a legal setback in finalizing a sovereignty deal over the Chagos Islands with Mauritius, delaying progress on the Diego Garcia air base agreement. Meanwhile, BT reported improved earnings backed by strong fibre broadband demand and cost savings, while easyJet cited robust summer bookings despite economic uncertainties. Tate & Lyle warned of slower revenue growth due to U.S.-China tariff costs, and the pound surged to a three-year high following an unexpected jump in April inflation to 3.5%, complicating the Bank of England’s rate-cut prospects. 

Top Market Movers: Among top gainers on FTSE 100 index, JD Sports Fashion PLC (LSE: JD.) witnessed a rise of 3.29% followed by Marks and Spencer Group PLC (LSE: MKS) which gained around 1.61%. 

Commodity Update: The dollar fell to a two-week low against the yen on Thursday amid U.S. fiscal concerns and weak Treasury bond auction results. President Trump’s efforts to advance his tax and spending bills increased market unease. Gold rose 0.95% to $3,344.80, silver gained 0.43% to $33.77, and copper edged up 0.31% to $9,555.50. Brent crude slipped 0.50% to $64.61 due to rising U.S. stockpiles and Iran deal uncertainty. 

Our Stance: Global market sentiment turned cautious as mounting concerns over the U.S. fiscal outlook weighed heavily on investor confidence. U.S. stocks dropped sharply, Treasury yields held near 18-month highs, and the dollar weakened following fears that President Trump’s proposed tax-cut bill—expected to add $3.8 trillion to the national debt—could exacerbate the $36 trillion debt burden. The "Sell America" narrative intensified after a weak 20-year bond auction and a recent credit rating downgrade by Moody’s. Meanwhile, emerging Asian currencies gained on the softer dollar, although regional equities stayed muted. Oil prices slipped 1% as reports surfaced of OPEC+ considering a July output hike, raising oversupply concerns. 

FTSE 100: The FTSE 100 trades near 8,725.95, down 0.69%, but retains a bullish bias amid firm market sentiment. The index remains above its 50-period Simple Moving Average, reflecting a strong underlying trend. However, a recent bearish candlestick suggests fading buying pressure, while the 14-period RSI at 63.19 has pulled back from overbought levels, indicating momentum exhaustion. Despite this, the broader outlook stays positive as long as key support levels are respected. A break above immediate resistance could trigger further gains. In the short term, the technical setup supports upward movement, although caution is warranted if momentum continues to weaken.​ 

FTSE 100 Technical Chart, Source - EODHD/Others