US GDP data boosts QE tapering cause

Heading into the close the FTSE 100 has risen by 40 points, stretching the gap from yesterday’s lows.

They say 24 hours is a long time in politics, and with the chances of military action against Syria shifting from being imminent to one of the possible courses of action, this would appear to confirm it. Subsequently, European equity markets have also taken the opportunity to retrace some of the week’s earlier losses. Rumours of a Verizon Wireless and Vodafone divorce are picking up pace and a settlement bill of $130 billion for Verizon is an expensive way to exit a marriage.

UK markets

As politicians continue to discuss an appropriate plan of action over Syria, it looks increasingly less likely that military action will take place prior to a UN report. Bulls will have taken heart from the resilience of the FTSE 100 in bouncing back above 6400, and today’s FTSE action has very much been Vodafone driven, with American partner Verizon desperate to separate and willing to pay an eye-watering $130 billion for the pleasure. This has helped push the embattled mobile phone operator’s shares up to a 12-year high.

Hot on the heels of G4S's announcement of drastic action in order to get back on track is the news that Serco Group are being investigated for potential fraud perpetrated by staff in managing its prisoner escort operations.

US markets

Today's economic figures from the US will have proven to the Federal Reserve that the progress being made with the US economy is still continuing. The much better-than-expected preliminary quarterly GDP figures should help the cause of those FOMC members eager to introduce tapering. As yet the looming issue of the US once again hitting its debt ceiling is being ignored by equity markets, but it's likely to be increasingly focused on as we tick towards October.

Verizon have certainly started the day off well, as the ability to disentangle itself from the controlling Vodafone holding is being seen as liberating rather than a burden to bear.

Commodities

Having benefited from the initial panic and flight to safety, the ground that gold has made is currently being given back, though it's unlikely we have seen the last knee-jerk reaction to this conflict. The other commodity to have reacted so vigorously has been crude oil. Already struggling with fears about the Egyptian uprising and the possibility of the Suez Canal being shut, oil traders have had plenty of reasons to believe the price could go higher. Any military action by the west against Syria could well bring further rhetoric from Iran and even more pressure to raise the price.

FX

Once again the range traders will be rubbing their hands as EUR/USD has run out of steam above the $1.34 level and support seems to be evaporating. Although headlines will focus on the Middle East tensions, there is plenty to contend with in the economic arena. Once again the US is ticking down to its latest debt ceiling deadline and Germany, the powerhouse of the eurozone, has general elections in less than a month. Further afield the collapse in many of the developing nations' currencies has stopped, at least for the time being.

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