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.
FTSE holding above 6800
The FTSE 100 is doing its best to hold above 6800, having rallied off its lows during the day as the early bout of selling in other European indices subsided.
More interest rate commentary has hit housing shares, as David Miles undergoes a dramatic transformation from dove to hawk. The question is whether any others have flown from the dovecote as well, but the latest Bank of England minutes didn’t seem to indicate any tectonic shift in thinking.
Shire has gone on the offensive after rejecting a bid last Friday, and for now the confident tone has gone down well with shareholders, the price only being 0.2% lower after Friday’s jump higher.
The fightback in ASOS is underway too, and the company will be keen to put June behind it. Shorts in the firm are at their highest in more than eighteen months, but with the bad news now in the price there will be some keen to buy in, hoping the AIM giant can prove its worth again.
Profit-taking hits US markets
US indices witnessed modest losses, but there is as yet nothing to suggest the gains of last week are yet under threat. Home sales and PMI figures were encouraging, but overall the feel was one of profit-taking rather than the start of a new leg down. If markets earlier in the year lacked a positive catalyst for gains, then at the moment they do not have a catalyst for a correction. One may be overdue, but corrections don’t happen because they are overdue. A worsening of the situation in Iraq, leading to a dramatic spike in oil prices, would fit the bill, but perhaps a bigger worry remains the lack of volatility.
Oil prices head lower
Oil prices were in fact lower on the day, as traders hoped that John Kerry’s arrival in the Middle East would mark the start of a more cohesive US response to the situation.
Brent crude has dropped back from its overbought condition, a sign that the gains have run their course for now. Should the fighting lurch back towards Baghdad, however, the spike in oil could kick off once again.
Cable sitting above $1.70
GBP/USD has been supremely unaffected by the David Miles switch from dove to hawk, with traders beginning to suspect the BoE might be trying too hard in its policy announcements where interest rates are concerned. If the BoE minutes had turned out differently Mr Miles’ argument might have more force, but until there is a real shift to a pro-rate hike caucus such utterances could meet with little reaction. Cable seems content to sit just above $1.70, having expended much effort to get to this point, but only a close below $1.6930 would signal a pullback is underway.