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The FTSE 100 has once again found that newsflow for its banks are giving the markets a sense of direction in early morning trading. This has been followed by some aggressively bullish UK service purchasing managers index (PMI) figures. The UK chancellor George Osborne must be feeling particularly lucky at the moment, hot on the heels of last week’s first-half profit for both RBS and Lloyds Banking Group. His biggest grumble must be that due to the summer holidays hardly anyone is around to see them. HSBC, the last of the big four banks to report, has left traders and investors a little underwhelmed even though it’s first half has clocked up profits of $9.2 billion.
Although broadly impressive, the FTSE has continued to dawdle just below its year highs and traders must worry that the lack of impetus to jump this hurdle will ultimately weigh heavily. Throughout this week we will see all of the major global countries posting trade balance figures, and currency traders will watch carefully as the implications for a currency war are calculated.
Unlike the FTSE, the S&P 500 and the Dow Jones have both managed to set new highs and look likely to continue this trend even with the driving force of the US reporting season over; the attraction of equities still remains higher than all the other asset classes. August has never been a month that has lit the imagination and it will probably require something out of the ordinary to change that reputation this week. Ahead of the open, we expect the Dow to start two points lower at 15,656.