Markets rebound after Monday drift

Markets have rebounded today after Monday’s indecision, signalling fresh gains may be on the way despite Iraq concerns.

The City of London
Source: Bloomberg

FTSE to finish flat

The FTSE 100 looks on-course for yet another flat finish, pulling back to the all-important 6800 level. Defensives have been in vogue during the day as lack of clarity on UK monetary policy caused investors to shun riskier names. In the world of UK monetary policy, more communication is not necessarily a good thing. Mark Carney seemed to have a sure grasp of narrative until recently, but this seems less secure now. The bank risks coming across as nervous, rather than in control, and such uncertainty just gives markets something else to worry about.

Dow on course for 17,000

US markets are seeing a low-volume levitation this afternoon, putting the Dow Jones back on course for 17,000 and seeing the S&P 500 push towards 1970. The market, bolstered by the Federal Reserve, seems content to ignore weaker US data and Iraq, putting off the day of reckoning yet again.

New home sales are surging once again, as the market continues the trick of focusing on one piece of good news to the exclusion of others. Comments from Charles Plosser about the need for a US rate hike have been dismissed as the ramblings of a frustrated hawk, as fresh record highs dominate headlines.

Oil rises as Iraq concerns grow

Oil prices found fresh buyers this afternoon after a temporary blip, amid mounting evidence that investors are becoming increasingly concerned about the long-term impact of the crisis in Iraq. Global production is tight already, and a semi-permanent loss of Iraqi output is the most serious risk to the global economy at present.

Gold and silver have both tried to make fresh gains this afternoon but have been knocked back once again. This rapid surge is quickly running out of steam, leaving the metals vulnerable to another quick trip lower.

Cable runs out of steam

Much of the heat has come out of GBP/USD, and moved into the discussion about UK interest rates, but for markets the discussion between Bank of England policymakers and MPs this morning didn’t produce much light. The post-Mansion House move is still being unwound, and more than a few over-eager sterling bulls will be licking their wounds. The trend will move higher in due course, but for now the muddier picture on UK rates should impede upward progress.

 

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