US retail data lifts gloomy sentiment

The FTSE continues to be more susceptible to moves on the back of oil price fluctuations than its European colleagues, as it heads into the close likely to end the day down by over 30 points. 

Shoppers with bags
Source: Bloomberg

Oil prices continue to weigh on FTSE

As the squeeze on oil prices continues and commodity prices struggle the FTSE, weighed down by mining and energy companies, has lagged the rest of European equity markets.

Today’s TLTRO auction has done nothing to dent the mindset that European Central Bank president Mario Draghi will, regardless of German protests, press ahead with plans to implement a European QE operation sometime in 2015.

As Greek equities continue to selloff, the markets have shown how unsure they are of the country’s political future, and the ambitious move by Prime Minister Antonis Samaras to call snap elections looks far from certain to succeed.

Ocado continues to find the going tough as sales growth has slowed and order sizes have shrunk, confirming that this yearend sales period for food retailers will be the toughest for some time.

Costa Coffee owner Whitbread has posted solid third-quarter figures and is subsequently confident of hitting its yearend targets; similarly buoyant claims have been made by Sports Direct after its first-half figures rose by 11%. SuperGroup has joined the clothing retailers utilising the ‘autumn was too warm’ excuse as its profits dropped by some 30%.

US recovery still going

The release of US monthly retail sales figures, much better than expected, have altered the slightly gloomy feel that the lacklustre ‘Black Friday’ results had given the retail sector. Not that any were needed, but this does confirm that the US economy has managed to keep its recovery in place regardless of Europe’s woes.

Less encouraging has been the performance of the major equity markets in the US, as abnormally high volatility looks set to give the Dow Jones its third day of triple-digit moves in a row.

Brent now at $65/barrel

Yesterday’s comment from Saudi oil minister Ali Al-Naimi ‘why should I cut production?’, has put to bed any suspicion that Saudi Arabia is about to cut its oil output. With this confirmation Brent crude has again been squeezed and now sits below $65 a barrel.

Considering the next OPEC meeting is not scheduled until early June, this is good news for those of us who have to fill up at the pumps. A weeks’ worth of moves higher have seen gold break through several technical levels, but its ability to hold above the 100-day moving average is looking more and more precarious.   

Rouble drops to lowest level ever

The results are in, and just short of €130 billion of the targeted LTRO’s were taken up by the banks, whether this is a sign of a lack of appetite from the banks or the underlying markets is open to debate.

Today’s auction will have done little to change the popular perception that a European version of QE is still required in 2015. This news resulted in a short blip higher but has seen EUR/USD swiftly return to where it was trading before the release as currency markets continue to factor in ECB action.

Russia has increased interest rates by another 1% today, taking its base rate up to 10.5%, and subsequently the markets have thumped the rouble taking it to its lowest level ever. The Bank of Russia has now increased rates by 5% in the last eight months, and these efforts are beginning to look increasingly desperate and ineffective.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.