BoE anxiety and ex-div stocks stifle FTSE

European markets are rebounding nicely this morning, but the FTSE is being held back by a combination of ex-dividend stocks and caution ahead of the Bank of England’s inflation report.

Bank of England
Source Bloomberg

The Asian session saw a drop in Japanese GDP and weaker Chinese figures but these were not wildly beyond the range of expectations, allowing markets there to end in a positive fashion.

Meanwhile European stocks continue their rebound, although DAX watchers will be keen to see this index break 9215 in order to be confident that the slump is being confined to the history books.

The FTSE 100 would be joining in more enthusiastically were it not for the rush of ex-dividends that are containing the index’s gains today. Also keeping UK markets in check is today’s Bank of England Inflation Report, with most content to wait out the day until Mark Carney appears with his bevy of fan charts. UK unemployment was looking better once again, but the slump in earnings sends another signal that the stars have not yet aligned for a hike in interest rates.

Yet another UK company sent a warning about the strong pound, as recruiter PageGroup highlighted the damage done to profits thanks to the increase in sterling, while G4S was boosted by fresh contracts in emerging markets that will help put recent scandals behind it.

US retail sales and a speech by Fed member William Dudley should enliven the session this afternoon, but overall the newsflow remains fairly light. Ukraine concerns remain, but if geopolitical tension continues to abate investors can return to focusing on rising US corporate earnings and an improving economy. Given these conditions, the atmosphere seems right for a further rally in stocks in the coming week, as those with an eye for a bargain seek to pick up shares beaten down during the recent volatile period.

Ahead of the open, we expect the Dow Jones to start some 50 points higher this afternoon at 16,608.

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