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FTSE struggles to find footing
In London markets have struggled to find their footing all day, weighed down by some poor news from HSBC that adds to the gloom cast by Barclays. For HSBC, it remains an eternal contest with Standard Chartered over which is the preferred emerging markets play, and for today at least StanChart is taking the lead over its Asian rival.
A steady lowering of profit forecasts has hobbled the London market, which has been unable to challenge the recent high of 6850.
Janet Yellen’s testimony caused a flurry of activity, but her careful game of saying as little as possible left little room for manoeuvre for frustrated traders. Acutely conscious of her ‘six month’ slipup, the new Federal Reserve chair is engaging in a delicate balancing act, as she seeks to simultaneously reassure markets that the Fed has not abandoned its careful nurturing of the economy and avoid communicating any suggestion that an interest rate hike is coming sooner than expected.
The dog of the day was the NASDAQ, which slumped as investors once again began to move out of the more highly-valued names in the market. Whole Foods was the big faller after it disappointed yet again on the earnings front. It is now off 40% from its highs with a weak forecast for the year ahead, the outlook is very grim.
For Alibaba, however, it seems to offer much more promise. Lurid valuation estimates abound, from $115 to $245 billion, but the IG grey market has settled in around $200 billion, signalling a company worth around 36 times revenues and 145 times earnings.
Gold falls through $1300
Gold and silver’s reaction to the Ms Yellen's testimony was predictably negative, given that the Fed chair did not throw caution to the wind and announce a tapering of the taper. Gold fell through $1300 once again as investors abandoned the metal, although it was not entirely clear where the money was going. The Fed is no longer driving the gold price higher with every one of its utterances, and selling of ETFs continues, leaving gold without visible means of support.
Sterling and euro cling to recent highs
The FX market has spent most of the day struggling to break out of relatively tight ranges against the US dollar, as it awaited news of Ms Yellen’s testimony. However, the immediate reaction was muted too, leaving currencies like sterling and the euro clinging on to recent highs against their US counterpart.
Central bank meetings loom for GBP/USD and EUR/USD, which will prove crucial in the near term. It is all but certain that the Bank of England will remain unmoved tomorrow, which simply means it is just a matter of time before sterling hits the magic $1.70 level against the US dollar.