Markets ease after yesterday's highs

Heading into the close, the FTSE 100 is down 25 points, as modest profit-taking sets in after yesterday’s fresh highs. 

Janet Yellen
Source: Bloomberg

Whitbread's form optimistic for traders

Yesterday’s optimism has been replaced by a more tempered assessment of the situation, although as the month-end looms we are still likely to see a lunge for fresh highs. Today has perhaps been the first in some time in which Greece has not featured in a significant way, which comes as a relief, while an improvement in Chinese data has also assuaged some nagging doubts.

Star performer Whitbread can be forgiven for striking a confident tone regarding the year ahead, and its recent form seems to provide ample reason for optimism, but this does raise the risk of disappointment should growth not live up to expectations. At 27 times current earnings the shares look a tad expensive, but history suggests Whitbread can live up to its hefty price tag. 

Fed in no rush to raise rates

Indices on Wall Street have been content to hold steady around their new highs, especially since the Federal Reserve seems in no hurry to raise rates. Unless today’s testimony marks a sudden change of tack therefore, we can expect less attention to be paid than was the case on Tuesday.

A weak report on inflation tomorrow would provide the ideal epilogue to Janet Yellen’s appearance today, endorsing her view that tightening has been delayed yet again.  

ECB QE will see inflows to gold

Gold bulls are feeling a little bit more confident today, as the price holds above $1200 for yet another day. There has been a clear appetite to defend this level, and yesterday’s dovish comments from Ms Yellen provided the catalyst for fresh buying. Despite the steep drop over the past five weeks the metal is still rising from its 2014 lows, and the return of central bank easing in the form of European Central Bank quantitative easing will see fresh inflows to the metal.

Saudi Arabia provided some stabilisation in oil prices as it reported a strengthening of demand pressures but a lot of the good feeling created was cancelled out by yet another rise in US crude inventories, which hit a month high.

Demand growth will take second place to oversupply, which continues to act as a drag on any sustained rally and threatens to undermine the bounce seen in February.

Yellen puts pressure on the dollar

The euro and the pound have been given rein to rise for the time being, as Janet Yellen continues to put downward pressure on the dollar. Her more dovish stance has certainly caught the market off-guard, marking as it does something of a pullback in the apparent drive towards rate hikes.

The Fed continues to stand out among central banks, but Yellen’s testimony over the past two days has cast doubt on the idea that summer 2015 will be the moment when rate increases make their long-awaited return. 

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