FTSE struggles for direction

German unemployment figures have cast a pall over markets, and a day devoid of further major macro has meant markets are struggling for direction.

The FTSE 100 has struck an indecisive tone this morning, shifting from losses to gains and back again. It has not exactly been a busy day for economic data, so the main driver remains last night's fresh record highs in the S&P 500 that continue to increase the bullish case for indices. The FTSE continues to lag behind its peers, making heavy going of every gain even as its equals in Germany and the US seem content to glide higher.

EUR/USD is heading towards yesterday’s lows after German unemployment figures showed the largest rise in five years, instead of dropping as expected. Every weak piece of German news puts much more pressure on the European Central Bank than equivalent figures from the eurozone’s periphery. Jens Weidmann may not be banging his fist on the table demanding action, but if this pattern continues the Bundesbank will have to start dropping increasingly heavy hints.

US futures are still pointing to a positive start, but a day bereft of macro data means we are unlikely to see much progress, even if durable goods orders are still having an impact. For the bears the sight of the Nasdaq 100 taking back all its lost ground is particularly galling; now we have to wait and see whether the market is more amenable to indices at this level than it was two months ago. Ahead of the open, we expect the Dow Jones to start ten points higher at 16,685.

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