FTSE 100 futures: Will Friday’s 143 point dip continue into the next week?

The FTSE 100 index closed 143 points down at the end of Friday’s trading session, just hours after reaching prices not seen since February 2020. Why could inflation and retail sales data hold the key for FTSE 100 futures?

  • FTSE 100 closes 143 points down today
  • Federal Reserve member sparks UK inflation concerns
  • Declining UK retail sales in May also a factor
  • Ready to trade the FTSE 100 index? Open an account today

Why have comments from a US Federal Reserve member caused panic for the FTSE 100?

It would appear the US economy is the main driver of the 143-point decline on the FTSE 100 index today. Jim Bullard, a member of the US Federal Reserve, has warned that increasing inflation levels in the US could warrant an interest rate increase in 2022.

That’s despite the Federal Open Market Committee’s median outlook stating last week that interest rate hikes would not happen until 2023. The FTSE 100 index has grown jittery as a consequence of Bullard’s comments, given that the UK economy broadly mirrors any fiscal measures applied stateside.

The latest UK inflation rates confirmed that inflation reached 2.1% in May. This is above the 2% inflation rate target set by the Bank of England, which suggests the UK economy is also showing signs of overheating.

How much did UK retail sales decline in May 2021?

The Office for National Statistics (ONS) published May’s UK retail sales data earlier today, confirming a 1.4% decline last month. This equates to a slight correction on April’s encouraging figures, following the reopening of non-essential retailers nationwide.

The ONS believes May’s decline was in no small part due to falling sales from food retailers, sparked by the reopening of the UK’s hospitality sector.

Paul Donovan, chief economist, UBS, said the data for May merely reflects consumers’ ‘shift in spending towards having fun’.

‘Having fun is generally excluded from the retail sales data,’ added Donovan.

Which constituents have weighed heavily on the FTSE 100 today?

The oil industry was one of the major players in today’s FTSE 100 decline. Both [shares:RDSB-US | Royal Dutch Shell]and BP PLCposted 3% and 2% losses during 18 June’s trading session respectively. This is due largely to falling oil prices, caused by the strengthening of the US dollar and the Fed’s hawkish approach to US inflation.

There are causes for optimism for FTSE 100 investors over the weekend. Before the close of Friday’s trading session, AstraZeneca confirmed it had won its legal challenge from the European Union regarding its Covid-19 vaccine deliveries. A Brussels Court ruled in favour of AstraZeneca, with the pharma giant stating it looked forward to ‘renewed collaboration with the European Commission to help combat the pandemic in Europe’.

The UK’s leading supermarket chain Tesco also posted a 1% year-on-year increase in sales for Q1 2021, up to £13.4 billion. This might not seem significant, but the three months to May in 2020 coincided with mass levels of panic buying due to the pandemic’s onset. A minor improvement on last year’s unprecedented demand means that this trading update shouldn’t be considered as sluggish as it appeared at face value.

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