Basel regulators boost FTSE

Heading into the close the FTSE 100 is up 25 points, as banks and financials have driven markets into positive territory reflecting the more optimistic stance of traders buoyed by Basel regulators' lighter touch. 

Banks lead UK markets

Financial stocks have lead from the front today, as lighter regulations imposed by the Basel committee on banking supervision have seen the banks viewed more optimistically by traders. 

Last week the FTSE 100 was focused on food retailers as they reported what was ultimately a less-than-impressive sales season; that being said, Morrisons has since risen like a Phoenix from the flames reclaiming a chunk of its losses. This week, however, it is the turn of the high-street stores, white goods retailers and most of the UK house builders. Although the food retailers struggled with diminishing footfall and a greater diversity in market share, the same is not expected this week. ASOS, the bellwether of online clothing retailers, will report on Tuesday, while Morrisons (powered by Argos) will report on Thursday. Balfour Beatty, Barratt Developments, Taylor Wimpey and Bovis Homes are all also set to impress the markets, powered by the government’s home-buying schemes. 

The recent addition to the IG platform of most seats won at this summer’s European Parliament elections has thrown up a surprise, with UKIP comfortably the most backed party. Client-driven prices point towards a 52% chance of UKIP coming out on top and a paltry 8% chance of the Conservatives emerging as the most successful party. 

NFP revision expected

Last week ended with many in the markets slack-jawed at the disparity between the expectation for non-farm payrolls and those published. Subsequent viewing of participation numbers has led many to expect a sizable revision later in the month, and a revaluation as a consequence. 

Alcoa kicked-off the US reporting season as usual last week; this week it is the turn of the banks. Expectations were already quite high but the developments in the Basel requirements over the weekend look set to give equities in that sector an extra boost, once we have heard from JPMorgan, Bank of America, Citigroup and Goldman Sachs. The divergence between company profits and market valuations could continue to grow having already hit the multiples last seen in 2009. These coming weeks could see investors' ability to suspend disbelief tested even further. 

Gold faces negative barrier

Once again gold is flirting with its long-standing resistance, which over the last couple of years has always resulted in an inability to break through. Over the last month we have seen a number of the larger financial institutions lower their price targets for the precious metal, and any move higher would be against a backdrop of city negativity. 

After extensive discussions and negotiations, Iran’s willingness to curtail its nuclear activity could see a lifting of sanctions and the inevitable increase in the global supply of oil. As these types of delicate negotiations have shown in the past, traders will be wary about fully factoring in the extra supply into the market until after the 20 January. 

GBP/USD drops in anticipation

AUD/USD has had another squeeze higher as it makes a concerted effort to reclaim lost ground from December. 

The collapse in USD/JPY appears to be picking up pace rather than finding any meaningful support. Any failure for this to materialise around the Y103.30 region could well see panic set in. 

Ahead of tomorrow morning's UK inflationary figures traders look to be reorganising themselves, as GBP/USD has dropped by over 100 pips over this morning’s trading.

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