Markets tumble despite week of easing

Indices tumble despite seeing a week of easing says Joshua Mahony, market analyst at IG

Markets tumble despite week of easing

The FTSE 100 has taken a tumble this morning, as the prospect of a rate cut is hitting UK banks at the same time as crude price continue to drag the energy sector lower.

Incredibly, while the post-referendum period has been dominated by positivity at the prospect of easy monetary policy, we are seeing indices turn lower just as we see those policies occurring.

It is clearly a case of buy the rumour, sell the fact for markets, with risk aversion driving equities lower and havens higher despite action from the RBA overnight.

The UK construction sector came under the microscope this morning, with the sector contracting sharply in the wake of the EU Referendum. However, the fact is that it could have been much worse and the fact that the sector shrank at a slower pace has been the driving force behind this morning’s sterling strength.

There is no doubt that the Referendum result has hit business confidence, yet the positive to be taken is that projects are largely being postponed as businesses see how the dust settles, rather than cancelling them altogether.

Ahead of the open we expect the Dow Jones to start 42 points lower, at 18,362.

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