FTSE builds momentum

In mid-morning trading the FTSE 100 is marginally in the red, but remains close to yesterday's 14-year high, as momentum to break out of its recent trading range continues to build.

A weak reaction to ITV’s figures and a slew of ex-dividend stocks has prevented the FTSE from rampaging higher this morning, but the momentum appears to be firmly with those expecting additional gains for the index.  The picture looks rather different for ITV, with investors turning off their sets following a stellar rally in 2013. For Compass, however, investor enthusiasm has been reignited by the special dividend, and although we have seen some sellers coming in this morning the overall picture is still firmly bullish. 

The AstraZeneca/Pfizer battle rumbles on, but it seems that political considerations will hold ever greater sway the longer the battle continues between these two pharma-titans. Given the UK’s apparent commitment to free markets, it still seems like the deal will go through, and IG’s binary bet on the outcome still suggests that Pfizer will eventually emerge triumphant.

UK unemployment figures have provided good news for both the government and the opposition, as the headline figure has fallen once again; however real wage growth is still flat from March, implying a weakening of inflationary pressures. Sterling’s reaction has been profoundly negative, dropping through yesterday’s lows as investors pare back an early interest rate hike.

All eyes will be on the Dow Jones to see if it can maintain its record high from the previous session, as markets adhered to the general rule that Tuesdays are a day for gains rather than losses. Ultimately, however, weakness in the small caps should continue to concern the broader community, as it indicates that appetite for further gains is still lacking in this part of the market. Ahead of the open, we expect the indices to start seven points lower at 16,707.

Tech comes back into focus today as Cisco reports after the bell, and while the stock has outperformed the broader NASDAQ so far this year, investors will want more clarity on whether the company is able to counter the growing challenges to its network hardware business. 

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