FTSE off four-month high
London’s main index tiptoed back from the four-month high seen yesterday, but still remains in an optimistic frame of mind. It has had one of its best runs in months, but once again the commodity bugbear made its presence felt, as mining stocks and oil firms sit firmly in the red.
The factors that have held the FTSE back for months now are likely to remain with us, and with the European Central Bank having lit a fire under European stocks with quantitative easing, it looks like the bargain hunters will be crossing the Channel in large numbers for a rich harvest in undervalued European firms.
Over on the continent indices are enjoying another good day, although Greece’s election on Sunday means that the likes of the DAX and CAC40 have not been able to hold on to their highs. Syriza’s victory is still the likeliest outcome, but beyond that the picture becomes very unclear, with negotiations between the new government and the EU likely to be long and tortuous.
Poor earnings weigh on US markets
Wall Street opened in the red this afternoon after a very strong showing yesterday, and yet again earnings are the culprit. The ECB’s meeting had been seen as much less exciting in New York, which has concentrated on earnings, and the positive impact has faded much more quickly in the US.
General Electric and McDonald's set the tone for the afternoon with lacklustre figures, and the latter added to the gloom with a very downbeat outlook that indicates the first months of 2015 will be just as hard as the end of 2014. Unsurprisingly the shares dropped rapidly before recovering to stand down 0.6% as the session continued.
Gold sees heavy losses
Gold shed nearly 1% during the course of the day, its first serious drop so far this year, as the post-ECB environment left investors with little reason to push the metal higher. Indeed, the strength of the rally, nearly 10% in a little over three weeks, has left the metal vulnerable to the classic combination of profit-takers and counter-trend traders that are looking to take advantage of any weakness.
Euro below $1.12
EUR/USD has been breaking to fresh lows again today, testing the waters sub $1.12.
PMI figures from the eurozone were a mixed bag, but the composite index for the eurozone as a whole hit its highest level since August, a sign that expectations of ECB QE had already revived confidence to some degree.
The problem for euro bulls (if there are any left) is that Greece’s elections on Sunday will only increase uncertainty and prompt a few more to sell the single currency and pick something where the outlook is more stable.