The FTSE 100 is struggling to finish the quarter in reasonable form, after a three-day rally that has carried it away from 6000. However, it feels like apocalypse postponed, rather than cancelled indefinitely. A few days of gains doesn’t really remove the feeling that the optimistic outlook which drove the first-half rally is now permanently broken. As the third quarter dawns, it is likely that fears about Fed tapering will resume their place at the forefront of investors’ minds.
Yesterday’s highs just above 6260 remain something of a challenge, but with the month-end and quarter-end both upon us it is not beyond the realms of possibility that we will see the FTSE 100 make one last lunge higher today. After such an increase in volatility this month, investors can be forgiven for feeling rather shell-shocked, but despite soothing words from Fed officials about no immediate change in bond purchases it is thoughts of the taper that will predominate in the months to come. Serco has lurched higher today after it said it was still likely to meet expectations for 2013 as a whole, although given the strong nature of trading this year it might find 2014 a struggle on a comparative basis.
Although we have the Chicago PMI and Michigan confidence today, the main focus will be on yet more Fed speeches. The world’s most powerful central bank has spent the last couple of weeks trying to undo some of the ructions created by its latest policy meeting, but the tapering genie is definitely out of the bottle now, and putting it back will prove impossible even for Bernanke himself. Ahead of the open, we expect the Dow to open around 25 points higher at 15,050.