FTSE clings to 6770

Mid-morning trading sees the FTSE down five points, but is clinging on above the 6770 level, after a week of heavy volatility.

The Gherkin
Source: Bloomberg

Although on the back foot this morning, the FTSE 100 has paused for breath following a week in which it lost around 1.5%.

The worries of the previous week, namely Iraq and higher UK interest rates, are still with us, but traders have been reassured by indications of potential US (and even Iranian) action in the Middle East, and the fact that no other Bank of England  policymakers have rushed to follow Mark Carney’s lead and come out with indications of earlier rate hikes in the UK.

Smith & Nephew leads the fallers following news that one potential suitor has been wooed away by the charms of another, but the market is generally seeing the continuation of last week’s broad-based losses, albeit in a far more modest format. At the moment there seems little reason to be in equities, a theme that will likely predominate so long as Iraq tensions continue. 

The Federal Reserve meeting this week brings with it the usual round of speculation about the next move in monetary policy. It seems a little overeager to suggest the US central bank will ease off on tapering due to the Iraq crisis merely to appease nervous fund managers. More likely is some sort of sticking-plaster comment about ‘keeping an eye on things’, while remaining tight-lipped about policy. Janet Yellen is unlikely to emulate Mark Carney in the near future.

Ahead of the open, we expect the Dow Jones to start 40 points lower at 16,735.

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