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Stocks slip as rally runs out of steam

Equity markets are in the red this morning as the bulls take their foot off the pedal.

Stock markets
Source: Bloomberg

Stock markets are in minor retreat this morning as investors cash in their long positions after indices enjoyed a large upward move since the end of the last week. The Asian trading was broadly positive with gains being made in Hong Kong and Japan, and Bank of Japan governor Haruhiko Kuroda defended his decision to introduce negative interest rates, which indicates he is dedicated to monetary easing.

The equity rally ran out of steam in the handover from Asia to Europe, and it is slightly worrying that stocks couldn’t continue their upward move after the Federal Reserve minutes and James Bullard’s comments were dovish. Traders are wondering what will trigger fresh buying when central bankers couldn’t spur it.

While the FTSE 100 is sub 6000, traders will be cautious of going long for fear of more downside risk to come and the next big support level in sight is 5945. If 6000 is retaken, bulls will be looking towards 6033 and 6085. The DAX is having a similar move to the FTSE 100, if the retreat continues, sellers will be keeping an eye on 9337 and 9225. A move through 9475 would give buyers move confidence.

It’s choppy trading for GBP/USD as David Cameron head to Brussels in search of reforms at the EU summit. The Federal Reserve may not be in a rush to hike rates any time soon, but sterling will suffer due to the so-called ‘Brexit’ risk. The move in the currency pair since early February has been to downside, which ties in with the longer-term trend since June 2015. $1.4235 is acting as support but it is taken out, the next level to watch is $1.4149.

Gold is standing still this morning, but while it holds above the $1200 mark we could see a move higher, especially now that we know the Federal Reserve are dovish. Gold’s big resistance levels to watch out for are $1217 and $1232.

Oil is pushing higher and the oil inventories report at 4pm will provide volatility, even though there hasn’t been much of a correlation between the price stockpile levels lately. Brent bulls are looking at $35.89 and buyers of WTI are focused on $34.

FTSE 100 risers and fallers (as of 9.30am) 

Company % change Index points
BT Group +1.03 +1.55
Centrica +3.81 +1.45
National Grid +0.51 +0.72
International Consolidated Airlines Group +1.42 +0.53
BAE Systems +0.84 +0.51

 

Company % change Index points
GlaxoSmithKline -3.13 -8.44
Royal Dutch Shell -2.44 -6.15
Royal Dutch Shell -2.25 -5.69
Rio Tinto Ltd -3.56 -3.33
AstraZeneca -1.51 -3.17


The day ahead

Economic data:

1.30pm – US initial jobless claims and Philly Fed manufacturing index (February): initial jobless claims: expected 275K, prior 269K. Philly Fed manufacturing index: expected -2.9, prior -3.5 

4pm – US oil inventories: expected 2.86 million barrels, prior 0.754 million barrels.

Corporate reporting:  Wal-Mart Stores Inc

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