The Review

From a position of 80% short in mid-May, 49% of clients are now long of the FTSE 100. This rapid change indicates a broad shift in sentiment after the leading UK index previously dropped back by around 4% from its May highs. Quantitative easing worries will continue to stalk markets, but if economic data improves this will help to alleviate some of the concerns brought about by the talk of a change in central bank policy.

Having recovered from a pummelling in mid-May, gold is now hovering just below the $1400 per ounce mark. It briefly broke above this level towards the end of the month, then fell back, but there seems to be a significant line of resistance for now. A reduction in quantitative easing might diminish the popularity of gold, but with the outlook in the eurozone still uncertain the yellow metal hasn’t entirely lost its lustre.

Interdealer broker ICAP was boosted by an upgrade from Swiss bank UBS – sending the shares racing to an eleven-month high. 

UBS upgraded both ICAP and rival Tullett Prebon, stating that higher trading volumes were a strong possibility for the near future, potentially boosting revenues for both firms. ICAP had been declining in price for an extended period, but the rating upgrade from ‘sell’ to ‘neutral’ and a higher target price has given the shares a major boost. 

Trading volumes have also been in decline this year, but the recent increase in activity will likely prove to be beneficial for ICAP. 

However, dividend yields move inversely to prices, so the higher price meant the shares were less attractive on a yield basis. When yields on US government bonds (Treasuries) spiked last week, reports emerged that some US investors were considering switching from National Grid shares to Treasuries. However, the consequent sharp fall in share price doesn’t dent a story of healthy cash flow and dividend increases.

Much like the broader market trend, the upward move in SABMiller is looking unsteady but has yet to come to an end.