A silver lining at the end of a cloudy week

European equity markets are clawing back some of this week’s losses, and the FTSE has added 60 points by mid-morning.

City of London
Source: Bloomberg

In the early stages of Friday's trading day equity markets are behaving in a considerably calm and more calculating manner. Having closed below the 6200 level, not seen since June 2013, the FTSE has quickly rectified that situation.

As attractive as many equity and index levels might be, it would be surprising to see the bulls become too enthusiastic. Opening up fresh long positions just before the weekend, especially when politicians like the Federal Open Market Committee’s James Bullard is throwing around such explosive comments, would appear unlikely.

A rally in the oil price in overnight Asian trading has seen the FTSE climbers list dominated by oil companies. However, with the oil markets supply massively outweighing demand this could just be a momentary blip.

Rolls-Royce has posted a profits warning downgrading its outlook for the year, from flat to down 3.5% - 4%. The effect of the Russian sanctions was cited as the reason for postponed and cancelled orders.

The troubling scenes in the eurozone sovereign debt and equity markets have not dented Europe’s drivers with September sales up 6.1%, the thirteenth month of increases in a row.

The dampened enthusiasm for IPOs has seen Jimmy Choo start trading today at 140p, the lower end of its IPO price range.

Most of the major US corporates have continued the trend of beating expectations when posting their third-quarter figures, with the notable exceptions of JPMorgan and Google.

As important as the US corporate third-quarter figures are, greater weighting will be given to the tone of Federal Reserve chair Janet Yellen’s speech today. Markets will be expecting a dovish tone to reflect the intrepidation that markets have as the eurozone recovery continues to stall.

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