US markets edge higher

The afternoon session sees the FTSE 100 trying hard to record a positive day, but with good news still in short supply it is looking like a tough job.

Federal Reserve
Source: Bloomberg

FTSE still looking vulnerable

Although off the lows, the FTSE still looks quite vulnerable, and underlying sentiment has not really shifted from the doom of last week. Geopolitics is still at the top of the list of worries, with investors decidedly unconvinced that US assistance would make any real difference to the situation.

Mark Carney’s comments last week seem to have kick-started speculation on rate increases by major central banks, and with the Federal Reserve meeting on the agenda for the week the focus has shifted from the Bank of England to Washington. Any changes to the statement will be in the form of subtle tweaking to the Fed’s view, but as at the last meeting the net result is likely to be no change. For the FTSE, the recovery of 6770 could bring out some new buyers, but any upside is still capped by 6880.

Bid talk lifts US markets

US indices are edging higher, but only tentatively, with bid talk being the main driver. After the biggest weekly loss in two months, a lot of investors will be dusting themselves down and asking what the next move is. Although not likely to signal any major changes, the Federal Open Market Committee meeting this week is big enough to keep most on the sidelines for the next two days. The spike above Friday’s highs in the S&P 500 signals once again that, if there is to be another short-term bounce, it will probably be led by this particular index, which has outperformed the Dow Jones, DAX and FTSE 100 so far this year.

Oil prices head lower

It was almost inevitable that crude oil prices would decline today, after their performance last week. There will have been plenty of traders eagerly sitting on profits over the weekend who have now sold on the absence of any further dramatic developments. Retrenchment in the price is now the order of the day as both Brent and NYMEX settle near recent highs. Unlike other crises Iraq really does have the oil supplies to be crucial for price direction and so traders can expect the price to remain highly volatile on fresh news.

Copper prices have bounced once again from $3/pound, more on some technical buying than any fresh catalyst. It is likely that last week’s highs around $3.05 will be the big level to watch for now.

Cable close to 2009 peak

Having been knocked back earlier in the session, cable is now testing the waters again above the major $1.6975 level. The 2009 peak around $1.7050 is now but a short distance away, but the momentum of last week has not been carried over the weekend. Any test of new highs needs a steady queue of BoE policymakers following their chief’s lead and suggesting rate hikes, but there wasn’t any additional comment over the weekend to this effect.

With the FOMC on the calendar this week the advantage is now going to start shifting back to the dollar, with the Fed likely to keep tapering steady at $10 billion. 

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.