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For the sixth time this year, the FTSE 100 is trading around 6880, the high watermark for 2014 so far. Earlier in the week it seemed as if the situation there was worsening and the rhetoric surrounding it becoming more worrying, but it appears Messrs Putin and Poroshenko have heeded the wisdom of Winston Churchill, deciding that ‘jaw-jaw is better than war-war’. The reaction on indices was immediate, and although the DAX has failed to hold its earlier highs, it is a clear sign that the prospect of further deterioration in relations between the major powers was beginning to act as a significant downward force on equity markets.
Hargreaves Lansdown continues to languish at the bottom of the index, down 4.5%, with the clear message from investors being that the firm can no longer simply rely on consistent performance, and must instead find something big to inspire its shareholders. Perhaps they should ask Ashtead, whose shares have risen another 3% today following results, with beefed-up earnings guidance signalling that there is more to come.
US indices, being at a greater distance from Ukraine and Russia, have not rallied to the same degree as their cousins in the UK and Europe but, the Nasdaq aside, have still made fresh gains. Having been less affected by the conflict the rebound has been more limited, and the US focus is on tomorrow’s ECB meeting and then non-farms on Friday. It is likely that this is keeping the Dow Jones from making fresh all-time highs, with most participants happy to wait until next week before chasing this market higher. Economic data however still provides a compelling backdrop for equity markets, and thus we should see them move higher in due course.
Apple slumped today as Samsung got its new products in early – the partnership with Facebook certainly raises the stakes, and reminds Apple that its position, while still dominant, is not as unassailable as in the past.
The news of a possible ceasefire in Ukraine has not had the expected impact on precious metals today. Normally investors would be abandoning gold and silver in droves but after yesterday’s steep decline those still holding gold appear to be hanging on with grim determination. The $1265 level is holding for now but a drop through here might see the selling accelerate and take us back to the June lows around $1240.
Oil prices by contrast are rebounding after their drubbing yesterday, on relief that at least one geopolitical problem appears to have been solved. If tonight’s Beige Book is suitably bullish then the rally may have legs, giving the commodity some strength heading into non-farm payrolls.
The bad economic news from the eurozone continued today, with PMIs and retail sales still broadly weak. However, a modest rise in EUR/USD saw it put more distance between it and the $1.31 level, but the currency pair is still oversold, so this is still a technical bounce rather than something more substantial. Now all eyes turn to the ECB, and the weight of expectations hanging over the bank mean Mario Draghi has his work cut out for him to reinforce the impressions created at Jackson Hole.