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Lack of action leaves markets drifting

The excitement of last week has given way to a day of little news, leaving markets generally directionless.

Canary Wharf skyline
Source: Bloomberg

FTSE trims its gains

Although still in positive territory, the FTSE 100 has trimmed its gains during the afternoon leaving us stalled below 6870 once again. The interminable drama goes on, but there remains the possibility of fresh gains if we can successfully clear recent hurdles on the way to 6900. As is the case with the broader global economy, momentum is present but not in significant quantities.

The TSB IPO remains a handy barometer of market sentiment, and the decision to price it at a lower level is a sensible decision given the ‘IPO fatigue’. Faced with the choice between a higher price and lower demand, or a more conservative valuation and stronger investor appetite, they have chosen the latter. It is hard to argue with the decision. 

US markets vulnerable to profit-taking 

US markets have moved higher again this afternoon, registering fresh highs, but the S&P 500 now looks overbought and vulnerable to profit-taking if more good news does not appear soon. Unfortunately it seems that is in short supply, leaving the index at risk of a short, sharp correction that could see it drop back towards the Friday low of 1940.

Reports of new products and the completion of the stock split mean that Apple dominates the headlines, and the more optimistic will be looking for the company to be added to the Dow Jones in due course, truly a sign that the world’s most recognisable tech brand has now joined the ranks of the establishment.

Oil prices head higher

Oil prices are buoyant this afternoon, as the black commodity hits its highest levels in over a week. Last week’s economic data from the US provided a starting point, but it was OPEC that really sparked a wave of buying. The group is expected to leave its output ceiling unmoved, as its members look to benefit from higher prices arising from global tensions. Those buyers with an eye on the longer term have pushed the oil price higher still, as they expect an eventual resumption of Libyan exports that could put pressure on OPEC to cut output. But for a US and global economy that is still fragile, a rising oil price, with its implications for costs across industry, is not a good sign. 

Euro heading towards $1.35

After being rudely rebuffed last week, it appears EUR/USD is making tentative steps back in the direction of $1.3500. It hasn’t been the most action-packed day for economic data, and as a result some US traders are taking the opportunity to push the currency pair lower, in the general direction of the lows seen on ECB day last week. Mario Draghi may not have gone for full-blown QE just yet, but when compared to the Federal Reserve’s stance the ECB is looking more dovish by the day. The net result is that euro bulls should find their task to defend $1.3500 harder and harder in the coming weeks.

 

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