Large stocks still weighing on FTSE
The FTSE’s retreat from the highs of last week continued today, as we saw the index hit its lowest level for over a week. 6800 might be important on a psychological level but it is still only a 1.4% decline from the peak, and the picture is distorted to some extent by two consecutive days of big moves in stocks with significant weighting in the index. The market appears however to have stalled yet again, with little apparent desire to revisit 6900 any time soon. Neither macro data nor earnings have shown the ability to energise this market, and this leaves us wondering what can.
US markets lacking direction
US markets still haven’t been able to give a clear direction, and a lack of macro data doesn’t help matters. It feels like the market has written off Tuesday and is concentrating on Wednesday’s Federal Reserve minutes, leaving major indices to wallow at current levels. Those hoping for something meaningful from the Fed minutes are likely to go away empty handed, but that won’t stop traders from carefully dissecting every comment recorded in the transcript.
The fine for Credit Suisse is another element serving to disrupt markets, but the decision to stop short of stopping the bank from operating in the US is an indication that the fine is more of a warning to ‘encourage the others’.
Brent endures a weak day
A second successive quiet day on the macro front has left the commodity market drifting. A short drop through $1290 for gold was swiftly reversed, leaving the rangebound trade firmly intact. A report showing a drop in Chinese consumer demand for gold has been blamed for the overall inability of the gold price to shift higher. Gold will always be a part of a portfolio in China, but it appears that it will not form as large a part as some had hoped.
Aussie hit by RBA minutes
The Aussie dollar is the day’s worst performer among the major currencies, hit by the RBA’s minutes that showed no change was likely in interest rates for an extended period. Reports that China might struggle to meet its growth target provided another excuse for selling, and there was even a touch of panic regarding some headlines about a threat to the gold-plated AAA rating. Having lost all of its gains in May, it now looks as if the 2014 uptrend has come to a halt with a jaunt back to $0.9200 now firmly in prospect.
GBP/USD has shaken off initial disappointment regarding the morning’s CPI figures, reasoning that price growth of any form is welcome, even if it doesn’t live up to some of the more overenthusiastic predictions.