FTSE holds onto gains

Heading into the close, the FTSE 100 has held onto its early morning gains and is up almost 80 points on the day.

This morning’s FTSE has served up a treat for the 'buy on dip' traders, offering a number of sectors to choose from and smashing the recent negativity. The weekend’s weather certainly seems to have given the average equity trader a sunnier disposition, and the upturn in mood was almost palpable as the City filled with commuters this morning. Very much like the weather, however, British optimism can be a fickle thing, and lasting to the end of the week is a tough ask regardless of how optimistic the start.

UK markets

Following a sporty weekend where both the British and Irish Lions and Andy Murray rewrote the history books, the FTSE started the week in sprightly form. Last week’s swift return north of the 6400 level has seen a return, as bargain hunters swooped in during the more recent dip. 

UK homebuilders Bovis have posted impressive figures, helping to move the shares to highs not seen since 2007. Weekend press speculation that Singapore’s state-owned Temasek Holdings was looking at taking a stake in Lloyds has subsequently been quashed, but investor enthusiasm has been maintained and it was still up 3.25% well into the afternoon’s trading session. 

The biggest fly in the FTSE’s ointment appears to be the ongoing problems revolving around the costs of compensation for BP following the Gulf of Mexico disaster. With a long way to go until the April 2014 deadline, there are real fears that the only recently reinstated dividend will need to be raided in order to cover costs.

US markets

Today marks the start of the US reporting season and, as ever, mining and manufacturing company Alcoa will start the ball rolling. Over the course of 2013 we have seen a steady if not spectacular improvement in US economic data and it will be interesting to see if the individual companies can back up the perception of an improving economy.

Although it is not one of the key factors for deciding how and when to reduce quantatitive easing, the health of US companies’ figures will be taken into consideration. Like their European counterparts US equities have started the week well, but Wednesday’s Federal Open Market Committee (FOMC) minutes will go a long way to dictating the rest of the week’s performance.

Commodities

Today has seen a bit of a respite in oil’s charge higher, and it looks like Egyptian political turmoil and ensuing fears over supply have been somewhat overdone. Having dipped below $1200, gold has spent the last week desperately trying to get itself a safe distance away without much success. With this level being broadly perceived as indicating a level of profitability for a number of the larger mines around the globe, this will be a key battleground between the bulls and bears.

FX

The USD/JPY currency cross continues to stretch its legs, and with the mid-high of $1.0373 in its sights the big hurdle will be Wednesday’s FOMC minutes, which will undoubtedly paint a confusing picture for analysts. With the latest Eurogroup meeting taking place in Brussels, and Greece struggling to meet requirements for its latest €8.1 billion bailout, currency traders will be watching the euro closely.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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