UK markets recover from Monday's panic
Normality in the UK seems to have been suspended as the political establishment decamps to Scotland to mount a final push to save the ancient Union. UK markets have recovered from their modest panic on Monday morning, but the referendum will remain the only game in town for another week to come, casting a cloud of uncertainty across UK shares.
Times look to be better at Kingfisher, with current CEO Sir Ian Cheshire departing. Under his watch the company has seen an impressive recovery from the financial crisis, although the tumble in the share price earlier this year does tarnish his image. Fresh challenges in the online world await the new boss, as value retailers snap at the heels of the company. Shareholders will hope Kingfisher and its ilk will not suffer in a similar way to the UK supermarket sector.
US markets continue to struggle
US indices are struggling yet again to make any progress, with steady declines continuing to eat away at the pre-Labor Day rally. The return of interest rate speculation is a natural development, putting bonds in a commanding position over stocks for the first time in a number of weeks, but with yields on the former still shaky equities should still see buyers as the traditionally healthier Autumn season for stocks gets under way. A few weeks of better economic data should see the buyers return, particularly if the Federal Reserve sticks to its cautious course on monetary policy.
US dollar weighs on commodities
With the dollar back in its pre-eminent position, commodities are suffering once again. Precious metals have lost their attraction now that Ukraine is off the agenda for now, but the broader declines in copper, iron ore and oil prices are symptomatic of something wider. The uncomfortable realisation that growth in various quarters is slowing will only boost the drive to the US dollar and Treasuries, leaving commodities with a firmly bearish outlook for the final quarter of 2014. With gold testing $1250 the June lows around $1240 have become a natural target, while silver is aiming for another test of the $18.75 level for the fourth time in over a year.
Carney still hinting at rate rises
Yet again Mark Carney finds himself in front of a hostile audience – yesterday it was trade union members, today it is MPs at the Treasury Select Committee. Again he has hinted at rate rises in the spring, which if nothing else has gone some way to repairing the damage wrought on the pound this week. But until the result of the referendum becomes known, the bank and its governor will struggle to construct their own narrative.
Elsewhere the dollar is still enjoying momentum from the San Francisco Fed’s commentary on US interest rates, with the effect most evident in USD/JPY, reigniting a rally that has seen the currency pair hit its highest level since late 2008.