Gold strength drives FTSE

The stronger gold price has seen increased demand for mining companies, and it’s this sector which has been the main driving force for the FTSE today. The index has gained 0.9% but remains well below the highs reached last month.

Sentiment vulnerable in Europe

Topping the index, Fresnillo added 4.2% aided by news that the company is close to having the Mexican explosives ban lifted. Given that the firm operates three gold and silver mines in Mexico, the news should now see production outlook for the year ahead lifted.

Barclays, while having to release its headline numbers a day early due to an embargo infringement, did not curry much favour with investors today upon release of the meat and bones of its fourth-quarter trade. Bigger bonuses, plans to cut 12,000 jobs, along with a lack of clarity 

surrounding how the bank plans to grow revenues did not cut any mustard with shareholders. The shares dropped by 7% in intraday trade before recovering slightly.

The inaugural monetary policy testimony from Janet Yellen has garnered much investor focus today. While the prepared statement offered little in the way of surprises, the consolidation in the broader equity markets implies that sentiment is still quite vulnerable. There is a reluctance to believe that, in the absence of loose monetary policy, fundamentals alone can continue to drive markets higher. The dovish tone adopted by the chair while reinforcing the Federal Reserve’s commitment to the scaling back of asset purchases has, for the moment, left traders giving the benefit of the doubt to further gains in equities.

Tech drives the Dow

Tech stocks have led the Dow Jones higher today, with AT&T and IBM topping the list of gainers. The index has added 87 points to stand at 15,888.

Cisco, the Californian based manufacturer of networking software and hardware, will be reporting second-quarter earnings after-hours tomorrow, 12 February. Expectations are that revenues will drop from $12.1 billion in Q1 to $11 billion for Q2.  It is worth noting that Cisco’s quarterly figures have come in better than expected every quarter in the last two years.

Pound sees some recovery

The interest in the safe haven of the Japanese yen has tempered a little today, as risk assets become a more viable place for capital. The yen has underperformed against the other G10 currencies as a result.

The Australian dollar was the best performer on the day, aided by the moves in copper and gold.

After the carnage following the Fed’s decision to start tapering, Ms Yellen’s comments will certainly carry some weight for the emerging market space. Emerging currencies were trading slightly heavier as caution prevailed ahead of her testimony.

The pound has recovered some of its losses against the greenback, helped by the news that UK retail sales were up 3.9% on a like-for-like basis from January 2013. Given that the Bank of England governor is to give an update tomorrow, the key question is whether we will see a goalpost move from Mark Carney with respect to his forward guidance.

Gold reaches $1290

Gold is up 6% since the beginning of the year and has seen price action near the $1290 level, but still a long way off the historic highs it saw above $1900 in 2011. China seems to be the main driver behind the current rebound in prices; the country consumed 1176 tonnes of gold in 2013, 41% higher than in 2012 according to data released by the China Gold Association. For now the 144-day moving average remains the key to additional upside, currently at $1292/oz. Support comes in from below at $1230.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.