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Lloyds Banking Group has been the worst casualty, falling 3.3% after the government sold 6% of its stake in the bailed-out bank. Barclays was also under water, with news announcing that it is facing a £50 million fine for breaching market-listing rules.
The failure to break through yesterday’s highs, despite the UK CPI easing to 2.7% in August as expected, suggests that investors are wary and less inclined to establish new long positions. The profit-taking that we are seeing is an attempt to drain what may be the final dregs of the rally. Since markets are, for the most part, expecting a tapering decision, any delay could be construed as a lack of US Federal Reserve confidence in the US economic recovery and may add some volatility and downside risk for equities.
Weaker-than-expected US inflation data in August may indicate that US GDP in the third quarter will fail to meet current expectations. The consumer price index showed an increase of 0.1%, lower than the consensus forecast for a 0.2% gain in August.
The US NAHB homebuilder sentiment index held at 58 in September, adding to the view that housing recovery continues to be the backbone of the US economic growth story. The index market's confidence is set to be at its highest level since 2005.
Microsoft, in the aftermath of its acquisition of Nokia, is to raise its dividend to 28 cents per share – a 22% increase. The software company also plans to initiate a stock buyback programme to the tune of $40 billion. The shares had climbed almost 2% in the pre-market but have settled back in early trade. The stock has now added 0.6%.
The Dow is currently trading up 50 points at 15,544.
Gold continues to tarnish in the run up to the Fed meeting. The failure to make gains through the $1433/oz level last month means that bias lays with the bears. For now the $1300 level has yet to subside; any close below this psychological level will open up a return to this year’s lows of $1180.
The kiwi dollar has taken the top spot in the G10 currencies today, as traders speculate that the high beta currencies will be the key beneficiaries of any taper talk tomorrow evening.