Dovish Yellen soothes markets

Incoming US Federal Reserve chairwoman Janet Yellen may have succeeded in soothing global markets last night with dovish comments regarding the current loose monetary policy.

However, waning growth figures from France and Germany this morning have tempered some of the nascent positivity, with the FTSE caught in a tight 25-point range capped by 6700.

Serco has been the victim of a host of broker downgrades today, shedding almost 10% in early trade following the company issuance of a profit warning for next year. 

Meanwhile Sainsbury's continues to add to yesterday’s gains. It retains the top spot on the UK benchmark as investors bet on its challenge to rival Tesco's market share.

France has been the real surprise this morning, contracting in the third quarter just as Spain and Italy escape the recessionary label. Germany has also lost some of its momentum, rising only 0.3% from the three months through to June. Meanwhile, despite the usual assurances, Greece continues to provide a dose of reality to the ongoing eurozone issues, with an unemployment rate for August at 27.3%. One questions the actual effects of a 0.25% rate cut from the European Central Bank when Greece's youth unemployment rises to 60%.

Nobody was expecting a stellar number with respect to UK retail sales, yet the decline of 0.7% in the last month – against an expected flat reading – tends to put a dampener on recent emboldened economic data. Still, one could expect to see a pick-up in this metric as we approach the holiday season.

Trade balance and unemployment claims in the US will provide more direction for markets today, but it’s the testimony of Janet Yellen before the Senate Banking Committee this afternoon that will be the key to whether the current upside moves in global indices can be sustained.

The Dow is expected to open up 17 points at 15,838.

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