FTSE still looking vulnerable
Although off the lows, the FTSE still looks quite vulnerable, and underlying sentiment has not really shifted from the doom of last week. Geopolitics is still at the top of the list of worries, with investors decidedly unconvinced that US assistance would make any real difference to the situation.
Mark Carney’s comments last week seem to have kick-started speculation on rate increases by major central banks, and with the Federal Reserve meeting on the agenda for the week the focus has shifted from the Bank of England to Washington. Any changes to the statement will be in the form of subtle tweaking to the Fed’s view, but as at the last meeting the net result is likely to be no change. For the FTSE, the recovery of 6770 could bring out some new buyers, but any upside is still capped by 6880.
Bid talk lifts US markets
US indices are edging higher, but only tentatively, with bid talk being the main driver. After the biggest weekly loss in two months, a lot of investors will be dusting themselves down and asking what the next move is. Although not likely to signal any major changes, the Federal Open Market Committee meeting this week is big enough to keep most on the sidelines for the next two days. The spike above Friday’s highs in the S&P 500 signals once again that, if there is to be another short-term bounce, it will probably be led by this particular index, which has outperformed the Dow Jones, DAX and FTSE 100 so far this year.
Oil prices head lower
It was almost inevitable that crude oil prices would decline today, after their performance last week. There will have been plenty of traders eagerly sitting on profits over the weekend who have now sold on the absence of any further dramatic developments. Retrenchment in the price is now the order of the day as both Brent and NYMEX settle near recent highs. Unlike other crises Iraq really does have the oil supplies to be crucial for price direction and so traders can expect the price to remain highly volatile on fresh news.
Copper prices have bounced once again from $3/pound, more on some technical buying than any fresh catalyst. It is likely that last week’s highs around $3.05 will be the big level to watch for now.
Cable close to 2009 peak
Having been knocked back earlier in the session, cable is now testing the waters again above the major $1.6975 level. The 2009 peak around $1.7050 is now but a short distance away, but the momentum of last week has not been carried over the weekend. Any test of new highs needs a steady queue of BoE policymakers following their chief’s lead and suggesting rate hikes, but there wasn’t any additional comment over the weekend to this effect.
With the FOMC on the calendar this week the advantage is now going to start shifting back to the dollar, with the Fed likely to keep tapering steady at $10 billion.