Barclays hinders FTSE's progress

After closing at a two-month low yesterday, the familiar story of banking skeletons has kept the FTSE 100 from fully benefitting from a stronger Wall Street close last night.

Barclays sign
Source: Bloomberg

Barclays shares have plummeted 5%, as once again investors pay the price for banking misdemeanours. This is another chapter in the story of US lawmakers versus high frequency trading, with cynics also suggesting it is part of a continued assault on European investment banks.

Allegations of fraud within dark pools are once again doing nothing to help the reputation of the nuts and bolts of 21st century equity markets. One of the key points to make here is that this is a lawsuit, and no number is even mentioned as to what this could cost Barclays.

No surprises that this once again gives investors the dilemma of whether to look at banking valuations for the long term, or steer clear and look for opportunities in sectors with less of a bull market hangover.

The overall market is going to struggle to make significant gains today whilst Barclays, its Asia focussed peer Standard Chartered, who are now 2% lower following a post-Hong Kong market close trading update, and a number of defensive tobacco and consumer staples trade lower as well. 

Cable traders will once again watch Mark Carney as he speaks on the Bank of England’s financial stability report this morning. Markets still look positioned for upside in Sterling, with a return to a $1.69 handle giving bulls another opportunity to top up. We will watch out, in today’s speech, for any measures designed to curb house price increases, but expect general interest rate rhetoric to be vaguer than in recent times.

Historically weak US data prints yesterday showed an incredible lack of influence on major FX pairs, with a 20-30 point move now being considered as volatility. This kind of stagnation is making life difficult for short term FX traders, but is providing good opportunities for long term traders to position themselves ahead of an expected uptick in volatility towards the end of US quantitative easing in the autumn. We will probably be able to recycle this last sentence for the rest of the summer.

Ahead of the US open we are seeing indices slightly off from yesterday’s close, the Dow Jones opening call is 16,843, down by 20 points.

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