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Having seen over 350 points taken off the FTSE in the last three trading days, markets were due a bounce with a lack of any real newsflow. For some time good US economic data has been viewed as negative, as it was more likely to enable the Federal Reserve to start to reduce its $85 billion monthly quantitative easing process. Today, however, good US data has helped to prop up US equity markets and therefore helped support those in Europe. It also appears that the initial reaction of traders to the reduction of cash within the Chinese lending markets was slightly overdone, and we have now seen a slightly more measured assessment.
Today’s equity markets have shown some real resilience, as the mining sector weighed down by the poor prices of so many commodities has bounced a touch. Unfortunately however there looks like little reason why, in the short-term, the negative trend will not continue for some time to come.
Equity traders will have had one eye on tomorrow’s budgetary comments, including which companies and sectors will have to suffer the brunt of the £11.5 billion government spending cuts. This data will be announced at 12.30pm (London time).