This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Disappointing UK industrial production
The UK has been chalking up some decent macro-data over the past few months, while the IMF gave upbeat forecasts for UK growth yesterday, and the pound has seen some stellar gains against the US dollar as a result. However, today’s industrial production numbers are a slight blot on the report card. The drop of 1.1% against expectations for a 0.2% increase should be taken in context with Germany’s comparative data, which saw industrial production decline by 1.1% in July. Germany's data release showed a rise of 1.4% in August, helping to positively engulf the slide seen in the previous month.
Once again the mining sector continues to be the main drag on the UK benchmark. Slapped with a downgrade from Morgan Stanley, Vedanta Resources – despite a fairly good trading update in respect of its oil and gas production – took the bottom spot on the index.
Going into the close the FTSE looks set to close below 6350 for the first time since July.
Facebook suffers in sell-off
The Federal Reserve minutes due out later this evening (London time) will be watched closely, despite the fact that they have become rather irrelevant in light of recent US events and should offer no real surprises. Anyone who has examined the employment data from the US over the past number of years – one of the two tenets of the Fed mandate and the key metric for tapering of QE – would see that the quality of jobs being added recently has been less than brilliant.
Facebook has been one of the more public casualties of the recent sell-off. Since rising through the $50 per share mark, the profit-taking has been swift. The share price fell 6% yesterday and has continued its decline from all-time highs today. The share price has shed €5 in the past two days.
The Dow has pushed lower as implied volatility reaches new highs. The index is down to 14,742 from the open of 14,776.
US treasury shifted upwards
The pound bade a hasty retreat below the 1.60 level against the dollar after the disappointing industrial production figures. The dollar caught a bounce against the main players with US treasury prices showing a slight shift upwards.
The 10-year treasury note rose by one point to 2.648%.
Gold misses trick on weak dollar
A downbeat assessment on the US recovery from Federal Reserve member Charles Evans, coupled with Barack Obama's nomination for über-dove Janet Yellen for Fed chair, could not keep gold above the $1300/oz level today.
Goldman Sachs also gave a bearish outlook on the metal which may be why we’re seeing such an aggressive downside. However, if gold prices cannot capitalise on a weak dollar and uncertainty from a gridlocked Washington, one has to wonder what exactly needs to happen to spur demand. For now the recent lows around $1282 remain key if we are to see a bounce back. Given the lack of upside of late, it is now looking possible that $1200 is the new target.