Traders don’t know which way to turn

In mid-morning trading the FTSE 100 is broadly unchanged as the market struggles to make its mind up.

Source: Bloomberg

A lack of pessimism does not constitute optimism, and that is exactly what equity markets are experiencing today, as traders don’t know which way to look. After several days of declines, traders don’t hold a particularly strong view in either direction. The bears have disappeared for now, but there’s no sign of the bulls just yet. This feels like limbo, with the market waiting for positive news to justify a bounce back. If there is none, we can expect to see another move lower.

SABMiller shares slid today after the brewer revealed a slowdown in the emerging market divisions, which previously propped up the subdued European division and the mediocre North American business. SABMiller’s attractiveness was largely its exposure to high growth regions, and if the emerging markets continue to dry up the brewer will be heading for a serious hangover. Unilever is on the rise after the firm announced a solid second-quarter update, as sales in toiletries and detergents outstripped those of foods. But dwindling demand in emerging markets is causing concern for the conglomerate.

We are expecting the Dow Jones to open 35 points higher, at 17,885, as the US market gears up for earnings reports from the more traditional industrial companies today like Caterpillar and General Motors. This reporting season has gone well so far, but with the success largely attributed to the reversal of downbeat estimates beforehand that positive sentiment may not last.  

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