The FTSE 100 is moving sharply lower so far today with not a single stock on the benchmark in positive territory. With most of the index’s early gains erased during yesterday’s session the near-100 point drop this morning means the market has continued to decline and reached its lowest level of the month. There is no fresh fundamental developments to explain today’s drop in equities around the globe, and the scale of the move suggests it could be something more than a simple case of profit-taking after a decent run higher.
Banks leading the market lower
Barclays, Standard Chartered and RBS are the three biggest losers on the FTSE 100 so far, all dropping in excess of 3%. The banking sector as a whole is one of the more sensitive sectors to a Brexit and with the result of the upcoming referendum still hanging in the balance, stocks in this area are under pressure. Having said that, this wave of selling is not specific to a single sector with no single blue-chip share bucking the trend and moving higher on the day. The overall sentiment has soured somewhat in recent days with oil prices also retreating back from their highest levels of the year.
Volatility for the pound hits seven-year high
The one-month implied volatility for the pound has spiked this week and in doing so moved to its highest level since 2009. Despite this increase the trade so far this week in sterling has been fairly subdued with the currency presently little-changed against the US dollar and Euro compared to Sunday night’s opening prices. This could be explained by market participants deciding to refrain from taking large positions when there’s such a significant event risk on the horizon and the narrowest weekly range in four weeks for GBP/USD suggests the market is likely coiling ahead of a large move.