FTSE hangs onto gains heading into close

Heading into the last hour of trading, the FTSE is hanging onto positive territory as it continues to be buffeted about by a combination of commodity price moves and worries surrounding Greece.

Rolls-Royce car, now produced by BMW AG
Source: Bloomberg

Commodities play with FTSE

Commodity prices continue to play havoc with the FTSE today, as the mining and exploration heavy index is pulled in one direction and then the other. The Chinese government’s decision to fast track around $1 trillion worth of infrastructure projects has been welcomed by the commodity stocks in the index. This change in policy, from just cutting red tape to proactively stimulating the economy, is the belated Christmas present that many investors have been hoping to receive. 

Rolls-Royce Motors, the UK-manufactured but German-owned luxury car manufacturer, has confirmed to the markets that 2014 was a bumper year. With 4,063 cars sold last year, this is the highest figure in the company’s 111-year history, with success largely due to the 40% increase in sales to the US markets.

Before any of the other big four supermarkets have had a chance to report their sales figures for the festive period, ASDA, owned by Wal-Mart, has upped the price-war ante by announcing another £300 million in price cuts on 2,500 goods.  

The first shots in this year’s UK general election have already been fired, and in these early stages the only thing that is clear is that the voters are set for a relentless war of tit-for-tat point scoring from all the parties. The IG binary market shows no clear majority, indicating the Conservatives and Labour will be closely pegged and will need either the Liberal Democrats or the Scottish National Party to form a coalition.

Corporate rumours fuel US markets

The US merger and acquisition rumour mill has moved into overdrive, ahead of Alcoa's kick off to reporting season next week. Speculation is high that Verizon Communications is eyeing up an approach to either take over or form a joint venture with AOL. Initial share price action in AOL has seen the stock jump by over 5.5%, while Verizon is up by less than 0.5%. Considering how the lines between mobile phone and content suppliers have continued to blur, this may not be the last speculation we hear from companies in these sectors. 

Oil continues to dominate

Oil continues to dominate the markets since WTI dropped below $50/barrel and Brent crude now hovers just above $52/barrel. With the way that oil prices are currently moving, last year’s comments from Saudi oil minister Ali Al-Naimi that 'even prices around $40 a barrel would not necessarily dictate a change in output' could soon be tested. For its part, gold has added to the picture of troubled markets trading almost $30 higher in the last 48 hours, with prices above the 100-day moving average at $1211. 

Markets show trepidation ahead of EZ CPI

Releases of economic data from the eurozone have invariably had a negative impact for the euro of late, and today's selloff in EUR/USD indicates that tomorrow's inflation figures are being viewed with trepidation rather than optimism. The previous support that EUR/USD enjoyed at $1.20 is now but a distant memory. Sterling is not fairing too much better against the US dollar – the disparity between confidence in the US and the UK has once again been highlighted, with the respective service PMI data painting very different pictures. The US's dropped by a fraction of a percent while the UK's missed the mark by several percent.

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