FTSE defies gravity, trades near all-time highs

The UK 100 index continues to rise nearly every day, trading at record highs, despite a miserable economic situation in the country, massive inflation, and a surge in interest rates.

UK retail sales surprised to the upside

January retail sales in the United Kingdom came in at 0.5% versus -0.3% predicted and -1.2% before. The core retail sales, excluding vehicle motor fuel sales, were up 0.4% month-over-month, compared to 0% projected and -1.0% before.

On an annualized basis, UK retail sales fell 5.1% in January compared to -5.5% predicted and -6.1% before, while core retail sales fell 5.3% compared to -5.3% expected and -6.1% previously.

You can also read: The “Fed may hike more” sentiment continues

While gasoline prices continued to decline, automotive fuel sales volumes increased by 1.7% in January 2023, following a 0.3% increase in December 2022.

The volume of food store sales decreased by 0.5% in January 2023, following a 0.7% decline in December 2022; we continue to hear feedback that customers are purchasing less due to the rising cost of living and food costs.

Repricing of the terminal rate continues

In the US, the president of the Federal Reserve Bank of Cleveland, Loretta Mester, stated that there was a “compelling economic case” for implementing another 50 basis-point increase. In addition, the president of the Federal Reserve Bank of St. Louis, James Bullard, stated that he would not rule out supporting such an increase in March, as opposed to the quarter-point increase seen earlier this month.

Fed futures are now showing an 18% chance of a 50 bps rate hike in March, up from 1% two weeks ago. Two weeks ago, the debate was whether the Fed would raise rates in March. Now, the base case shows at least 75 bps in rate hikes by June.

UPDATE: Futures are now showing an 18% chance of a 50 bps rate hike in March!

This comes after the Fed’s Bullard just said that he “wouldn’t rule out” a 50 bps rate hike.

The never ending fight against inflation seems to be roaring on.

Rates are likely going well above 5%. pic.twitter.com/ucMesxh5ss

— The Kobeissi Letter (@KobeissiLetter) February 16, 2023

The broken line of the triangle pattern now serves as a first support, currently near 7,950. Today’s dip to that level was quickly bought, suggesting bulls remain active. Thus, the outlook appears bullish.