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Rolls-Royce and housebuilders were the main gainers this morning in London, with the former up on hopes of a new deal with Airbus and the latter still finding buyers after the Bank of England opted not to squish the housing market boom yesterday. But on the final day of the week and with the end of the quarter looming as well, there are few compelling reasons to boost equity exposure, keeping gains limited.
A small downward revision for yearly UK growth was mostly ignored, with a rise in business investment helping to keep sterling supported versus the dollar. Most investors are aware that the recovery has been built on low rates, and this is why the prospect of a rate hike makes everyone from Mark Carney downwards acutely nervous.
With little US data out this afternoon, any rebound for US markets should be fairly tentative. Markets finished off the lows yesterday indicating that there are still dip buyers lurking, but until earnings season kicks off in earnest upward progress will be lacking. A 17,000 print on the Dow Jones and 2000 on the S&P 500 still seems like a question of ‘when’, not ‘if’, but it is unlikely to come next week with both the European Central Bank and non-farms on the calendar. Ahead of the open, we expect the Dow to start seven points lower at 16,839.