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FTSE continues move lower
The FTSE 100 has moved lower again during the afternoon session, losing around 70 points, as the selloff prompted by weakness in the tech sector spreads to all parts of the market. The underlying picture remains strong, with economic data pointing broadly in the right direction, and US earnings expected to reinforce the sense of an economy on the mend. However, sentiment in equity markets has never really found a firm footing so far this year, and markets have been quick to take any opportunity to sell off. Even the old stalwart of China growth is not helping matters, as the World Bank cuts its forecast slightly, now expecting 7.6% rather than 7.7% growth. That isn’t a major shift in opinion, but taken with signs of a fresh crisis in Ukraine the elements are in place for a sustained bout of weakness.
US investors await Fed minutes
The handbrake turn in markets continued as Wall Street opened for the week. Previously racy stocks in the tech and biotech arenas have been dumped with unseemly haste. A day devoid of heavyweight economic data has not helped matters, and investors are uncomfortably aware that they will have to wait until Wednesday’s Federal Reserve minutes before they get their hands on something of real worth. To make matters worse, there is the possibility of another flare up in Ukraine/Russia relations if the latter decides to act on reports of fresh unrest in eastern Ukraine. Earnings season kicks off tomorrow with Alcoa, but even this is only a mere morsel compared to the end of the week, when JPMorgan and Wells Fargo herald the real beginning of the flood of company reports.
Copper could retest $3.07
Fortunately, there is some positive activity in the copper price. Bargain hunters have evidently stepped in here (while some opportunistic shorts might be bewailing their timing), and the price is now looking to bounce back to highs seen last Friday. A probe below $3 overnight was short-lived, and a break through Friday’s top around $3.06 clears the way for a quick retest of $3.07, which was the peak of Wednesday’s price action.
Euro benefits from US dollar weakness
Dollar weakness predominates today, as a dovish interpretation of Friday’s job numbers takes hold. Traders now seem to think that the softer headline number points towards no change in Fed policy, and expectations on Fed tightening are unchanged – namely, the first rate hike is forecast to come sometime in mid-2015.Discussion of European Central Bank QE has been rife today, but the overall consensus has seen no pressing need to undertake any unconventional policy in the currency zone. This has given EUR/USD the strength to bounce from $1.37, retracing much of the post-ECB slump. Further dollar weakness ahead of Fed minutes on Wednesday means that we could soon see yet another retest of the $1.38 level.