Time to bounce?

The overwhelming negativity of yesterday looks a little overdone now, as stock markets in the UK and Europe rally, seemingly without a care in the world. 

Data on screen
Source: Bloomberg

Thank OPEC, or thank oversold conditions, or just be thankful that Janet Yellen isn’t speaking today. Whatever the reason behind the buying, it looks like a bottom is in place for now, with the FTSE 100 up over 130 points from its low yesterday.

One sign of market health can be seen in the Stoxx 600 banks index, which is strongly outperforming the broader European index, marking a notable change from previous sessions. Having led declines earlier in the week, the rebound in one of the heaviest-sold sectors is an indication that investors have returned, at least for the time being. A general easing in the Credit Default Swaps (CDS) of European banks is also a sign that tensions have eased, for now at least.

In the US, banks have significantly underperformed the broader index, but with these banks in better health than their European counterparts, there is the potential for a market rally on Wall Street to be led by banks and oil names, with some heavily-oversold tech stocks joining in for good measure.

On the FTSE 100, the gains are broad-based, with just a handful of names failing to join in the general bounce.

Rolls-Royce leads the way after its numbers painted a marginally more positive picture (along with a necessary cut to the dividend that will have yield hunters wincing), but the real gains are being added by miners, banks and oil shares. The latter have been significantly boosted by rumours of yet another OPEC meeting (or talk of a meeting), which is fueling some hopes of production cuts. The close correlation between oil prices and equity indices has been a major factor in deciding whether the market stands or falls, so the performance in the oil price remains a must-watch for investors.

Yesterday saw the index close lower, with just 13% of the FTSE 100 trading above their 20-day simple moving average (SMA). However, today that number has moved to 17.8%, with around 89% of the index advancing. The advance decline line (a measure of the number of risers versus the number of fallers) has hit lows not seen since mid-January, so any turn higher in this metric, along with a push above the 20-day SMA for a greater percentage of the index, will mark a turnaround.

Please check the indices levels to watch update for more on technical levels.

Looking to the US open, we are expecting (as of 9.50am London time) to see the S&P 500 open at 1843, up 14 points from the close yesterday, while the Dow Jones is currently looking to start the session at 15,748, up some 90 points from the end of Thursday’s session.

FTSE 100 risers and fallers (as of 9.55am)


Company Index points % change
BP +8.1 +3.7
HSBC +8.1 +2.5
Shell +6.2 +2.8
Rolls-Royce +4.8 +12.6
Rio Tinto +4.7 +5.8


Company Index points % change
BT Group -1.5 -1
Imperial Tobacco Group* -0.95 -0.7
Tesco -0.36 -0.6
RELX -0.22 -0.44
Persimmon -0.18 -0.8

* previously Imperial Tobacco

The day ahead:

Economic reports:

1.30pm – US retail sales and core retail sales (January): MoM retail sales are expected to swing to 0.4% from a -0.1% decline in December, and anticipated to increase to 2.31%, up from 2.2% on a YoY basis. MoM core retail sales are tipped to increase by 0.25%, which compares with a 0.1% drop from the previous report.Markets to watch: US indices, USD crosses

3pm – US Michigan consumer sentiment (February, preliminary): the forecast is for 91.94, down from 92. Markets to watch: US indices, USD crosses

Central bank speeches:

3pm: Fed member William Dudley speaks

Company reporting:

No major US names reporting today

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