European markets lead the way higher

In mid-morning trading the FTSE 100 is up just five points, once again lagging behind the more optimistic European exchanges.

Weighed down by some disappointing corporate news, the FTSE 100 is just about holding its own. Fortunately, although several shares are less than impressive, the same can’t be said of the UK monthly retail sales figures, which came in five times stronger than expected.

It makes a pleasant change for European markets to lead the way higher without feeling the need to see the US market move first. The economic picture does appear to be looking a little rosier, but the reality is that the market values of many equities have factored in this and more. This could be the scenario for much of the year.

The FTSE has been weighed down by Shell announcing a profit-warning, citing both rising costs and lower productivity. Over the last 12 months the markets have already been factoring in a weaker performance from the Dutch oil giant and, in contrast to its counterparts, the rise in the share price has been decidedly lethargic. Shire, the UK pharmaceutical company, is no less disappointing. It revealed that it will be disposing of its Dermagraft subsidiary and writing off the $650 million cost in its fourth-quarter figures. William Hill, on the other hand, has seen improved fourth-quarter figures, with revenues increasing by 16%. A reduction in bets placed in high-street outlets has been more than outweighed by the increase on online bets. The banks could well struggle again today, following Labour leader Ed Milliband’s decision to focus his attention on them. It is unclear who exactly is going to want to buy all of these high-street banks.

US markets closed the session on the soft side yesterday, while company reports were coming out thick and fast. A bit of book-reorganising may well happen ahead of the long US weekend, with Monday being a bank holiday. Among those reporting, traders will be paying special attention to Morgan Stanley, Bank of New York/BNY Mellon, General Electric and Schlumberger.

Ahead of the open, we expect the Dow Jones to start 15 points lower at 16,402.

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