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Last week finished on an optimistic note, but the bears have returned this morning, helped by figures from Barclays that have shattered the pleasant atmosphere built up by Lloyds and RBS. The bank continues its decline from the heady days of Bob Diamond, with adjusted pre-tax profit down 5%. Like its US peers, Barclays has been hit by the slump in trading revenues in certain divisions, but it looks as if management is failing to stem falling profits and keep costs under control. The timing is not auspicious for Thursday’s big reveal for the strategic overhaul set in train by the new boss.
In broader terms it looks like the rally in the FTSE 100 has run its course for now. The big question now is whether we can sustain the move above 6800, but it certainly feels as if markets had gotten a little ahead of themselves, especially in regards to Ukraine, where the situation seems to be worsening by the hour.
Early optimism in futures markets has been tempered, and we now expect a quiet open to trading in the US. Services PMI data steadied the ship yesterday, going some way to offset the GDP nightmare of last week. Caution will likely prevail ahead of testimony from Janet Yellen tomorrow, in case she opts to repeat her ‘six month’ prediction that vexed markets in March. This time around she is likely to be far more circumspect if pressed on the subject.
Ahead of the open, we expect the Dow Jones to start six points lower at 16,524.