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After a bright start to the week, equity markets already look to have given up the fight as trading screens are bathed in red. It appears fear rather than hope is the overriding feeling traders have as they look further into the week. Expectations are low for the Chancellor’s budget, as the looming issue of the Brexit referendum will ensure any changes brought to this budget will be less than full measures. The FTSE, for its part, still has 35% of its constituents trading above their 200-day moving average. This shows there is still some core strength to investment benefits of an index yielding 4.49%.
Equities' position as the most attractive home for cash is less compelling, especially as some sectors have found dividend yields difficult to maintain. The fact that 70% of the FTSE is above its ten-week moving average does suggest investment funds are only willing to let the prices fall so far before finding the value compelling enough to re-enter the markets.
After the first hour of trading, the FTSE is trading 40 points lower. The major contributors to this fall have been the basic materials sector (accounting for 14 points), the oil and gas sector (accounting for 8.5 points), and the financial sector (5.7 points).
Sainsbury’s has posted impressive figures as sales look to have finally broken the last two years of malaise. Considering it has just increased its bid for Home Retail Group – the owners of the Argos brand – this boost to the share price is particularly timely. Ocado, on the other hand, needs to act quickly as its corporate plan appears to be unraveling. The agreement it has in place with WM Morrison looks less binding, with the grocer having embarked upon a new agreement with Amazon and still struggling to gain the foothold in customer loyalty it would like to have.