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It has been a drowsy day on the market, with the FTSE 100 drifting aimlessly for most of the day, as London enjoys what might be the end of the current heatwave. Economic data has been a touch poorer, but not bad enough to inspire panic or change expectations about central bank policy. Overall, today’s market has something of the 'coiled spring' about it, seeming to be waiting for an excuse to move higher.
Summer volumes and worries about big-name health companies conspired to prevent any lasting gains on the FTSE 100 today, although the 6600 level continues to hold with commendable determination. News of additional police investigations meant that both GlaxoSmithKline and AstraZeneca were lower, although the latter was able to recover most of its losses during the afternoon session. With precious little corporate or economic data to motivate them, traders are clearly content to sit and wait for developments later in the week.
At least we have had US economic results to keep markets interested. The Chicago Federal Reserve index for June was below expectations, but it was a modest improvement over the May number. Meanwhile, housing failed to live up to its recent good run, with existing home sales dropping by 1.2% in June instead of rising by 1.5%. However, traders took this in their stride, with the US 500 initially gaining 2.5 points as it looks to reach 1700 for the first time. More worrying was a weak set of figures from McDonald's, which is facing stiff competition from rivals. At least demand in the US is satisfactory, unlike in continental Europe.
Gold fans are enjoying their day in the sun as the metal continues its drive above $1300 an ounce. The break of this level dragged Silver higher as well, with the silver metal pushing through $20 an ounce to a one-month high. However, both still look vulnerable to the shorters on a longer-term basis, particularly if taper expectations are revived in coming weeks.
Dollar weakness has seen the Australian dollar and the pound both make gains against their US counterpart, but the main action has been concentrated in USD/JPY, which has dropped below Y100 once again following the election news in Japan overnight. This however is probably more of a ‘buy on the rumour, sell on the fact’ development, since any fresh impetus on the easing front by prime minister Abe will give new strength to the US dollar.