Central banks today's key driver

Yesterday’s positive gloss has dimmed somewhat today, and investors have been greeted with a more sedate yet edgy opening session.

With central banks the key driver in dictating market direction today, the FTSE is currently off by 14 points at 6360.

Equity markets have been dogged by speculation and conjecture in relation to whether or not the FOMC will detail an exit strategy from quantitative easing. Today is crunch day, and it is unclear how exacting the Federal Reserve chairman, Ben Bernanke, will be about relaying forward-looking plans to the waiting world. What is certain is that we can expect some volatility during his statement, as the markets get to grips with any implications.

News that mining giant Rio Tinto is to cut more than 40 jobs in an effort to reduce costs, along with a positive outlook for the firm expressed by Citigroup, has seen the company take the top spot on the FTSE 100, adding over 2% in early trade. Miners overall are expected to remain under pressure, given the new downward growth revision from HSBC for the world’s largest commodity consumer: the bank has forecast that Chinese GDP will be 7.4% in 2013.

Conversely, Aggrekko is languishing at the bottom of the index, with the share price shaving 3.37% as a result of a downgrade from JP Morgan. Despite the fact that the power provider stated yesterday that it would meet half-year expectations, the profit warnings from the last year still weigh it down.

Closer to home, a minority of the voting members in the UK Monetary Policy Committee stated that the need for additional monetary stimulus was ‘compelling’, while remaining unanimous about keeping rates on hold. We saw the UK year-on-year inflation creep back up to 2.7%, with expectations that it will go as high at 3% this summer. This is coupled with a negligible degree of accompanying wage growth, and one has to question whether the Bank of England has lost all regard for its key mandate. Sterling has pulled back on the news, and is currently trading at 1.5620 against the dollar.

We are expecting the Dow Jones to open up 17 points at 15,335.

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