Macro data and profit-taking restrain stocks

A mere hair’s breadth below its all-time high yesterday, the FTSE is trading fairly flat, having been beset by an element of profit-taking as well as some stocks going ex-dividend.

European traders await macro data

Investors have one eye on the plethora of macro data due out tomorrow, so with this added uncertainty there is a reluctance to jump aboard the equity train at such lofty highs.

The UK unemployment data, while in itself excellent news for the economy, does tend to take the shine off the riskier assets. Investors are questioning whether the record-low interest-rate environment can continue for much longer.

Financials provided the main drag in the UK benchmark, with Royal Bank of Scotland sliding 3% as various investment houses disagreed on its potential performance. The firm provides an excellent summation of the varying sentiments towards the banking sector, as Citi and UBS rated it a sell while Liberum raised its target price.

Sage Group put in a good performance in Europe, despite overall growth problems.

US earnings season disappoints

Perhaps expectations are too high for corporate announcements at this juncture, given the level of earnings disappointments hitting the headlines. IBM's report of a 5% drop in sales and a 1% decline in net profit owing to weakness in emerging economies prompted investors to log out of the stock. The shares fell over 4% in early trade.

The Dow Jones is currently off 31 points at 16,383.

eBay is in the red ahead of its fourth-quarter earnings, which are due after the closing bell tonight. US consumer confidence is on the rise, but thrifty consumers can still pick up bargains at the online auction house.

Sterling shows its muscle

The markets once again seem to have the measure of the UK economy. The moves in UK bond markets and the stronger pound since August have been somewhat prescient of the fact that the Bank of England is behind the curve in its forward-guidance model and the pace of decline in unemployment levels.

The pound surged upward against both the US dollar and the euro, marking a 52-week high versus the single currency as the price re-established itself above €1.22. The Bank of England has reiterated that the 7% metric is merely a threshold rather than a trigger point. The next inflation report will almost certainly underpin the monetary policy direction to come. The euro is trading sideways ahead of the eurozone PMI data due tomorrow.

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