The FTSE 100 has shed some 30 points so far this morning, although it has bounced firmly from the lows indicating that, for the moment at least, the ‘buy the dip’ crowd are awake and at their posts. The losses have been broad-based in London, but for the moment it seems to be the immediate knee-jerk reaction to Friday’s poor finish in the US rather than the start of a sustained move. Reports of unrest in eastern Ukraine are not helping risk appetite, because of fears that the situation may play out in a similar fashion to the events in Crimea – namely popular discontent, followed by the arrival of Russian forces as ‘protection’.
Corporate news is mostly absent this morning, but building materials group CRH has been boosted by confirmation that Holcim will buy France’s Lafarge, cementing a deal first mooted on Friday. Other gainers today have been the steady dividend payers, which is why we’re seeing United Utilities, Vodafone and the supermarkets all edge into positive territory, as investors flee the racy momentum plays in favour of more sedate names.
The immediate reaction to non-farms didn’t last and we had a firmly negative end to the week in US markets. Attention now shifts to the latest set of Federal Reserve minutes on Wednesday. No change to tapering is expected, but what really unsettles markets at the moment is commentary surrounding US interest rates. This has taken the place of tapering as the element designed to give investors palpitations. If the minutes back up Janet Yellen’s press conference assertion of a six-month gap between the end of QE3 and the first rate rise, then we could be in for another ugly reaction. Ahead of the open, we expect the Dow Jones to start 35 points lower at 16,377.