Markets have again experienced fear as the dominant force, and have once more headed south, with next week's FOMC decision looming large on the horizon. Traders of the 'buy-on-dip' or 'risk-on' mindset are thin on the ground, and prudence appears to be the option of choice for the time being.
US markets set tone for UK
The FTSE 100 started the day drifting aimlessly, but the start of US trading gave the index direction, dragging it lower. By mid-afternoon the FTSE was some 130 points off its starting point at the beginning of December, and looks to have its work cut out if it is to maintain its ten-year track record of positive Decembers. The Royal Bank of Scotland leads the FTSE fallers. Its shares have been battered by the news that, only three months into the job, Nathan Bostock is jumping ship from his role as financial director and joining Santander’s UK arm. Not to be outdone with negative news, Lloyds Banking Group has been fined £28 million by the FCA for 'failings' in the control of its sales team. Judging by the share price's reaction, markets are becoming rather blasé about bank indiscretions, and any fines that are not measured in billions are struggling to raise much of a response.
US budget strategy has minimal effect
Who would have thought that the Democrats and Republicans could agree on something, and ahead of any deadlines too? Of course, settling on a strategy for the US budget is one thing, and agreeing on a policy for the US deficit is quite another, but here's hoping this can become the norm. All of this is merely filler, as the markets remain focused on next week’s FOMC decision. Although the economic landscape might be more welcoming to a quantitative-easing cut, it would be a brave decision to take with the important retail sales season upon us: consumer confidence can be a fragile thing.
Gold bounces back
This month’s trading patterns have confirmed that buyers have been hovering just above the $1200 level in gold. This fact, coupled with the assessment that many miners would view a number of their operations as untenable should the spot price drop below that region, has prompted a solid bounce in the precious metal. Cynics will point to the well-entrenched negative trend that still remains intact, viewing the recent move higher as mere postponement of the inevitable. Whatever the ultimate outcome, gold remains as divisive as ever.
EUR/USD traders pause for reflection
Indecision appears to be the order of the day with EUR/USD traders. After a couple of days of charging higher, the looming 1.3800 level seems to be causing dealers to pause for thought. Having flirted with the summer highs, USD/JPY looks to have momentarily lost its nerve. That being said, the late-October move to date still looks well placed, and the Japanese government will be hoping for an eventual break higher.