Markets turn as selling subsides

The FTSE 100 notched up its first gains for the week while US markets looked to repair some of the damage wrought over the previous two sessions.

City of London
Source: Bloomberg

Selling pauses on FTSE

Yesterday’s plunge for the FTSE 100 appears to have found a floor around 6650, indicating that for the time being the sellers have done their work. An impressive drop carried the FTSE 100 into oversold territory for the first time since early August, and a few traders will be looking back to that point and wondering whether history is about to repeat itself. They will also be working out whether Mario Draghi’s comments this morning, regarding supportive policy, have combined with easing China concerns to provide a prudent rationale for going long once again.

Bargain hunters were active in the miners such as Fresnillo, Antofagasta and Anglo American, with the first of these lifted by supportive broker commentary.

The absence of further doom and gloom surrounding ailing giant Tesco will have helped the mood too, but with criticism of the board becoming louder by the day the company needs to spend its time concentrating on producing a turnaround programme designed to be as convincing as possible.

New home sales lift US markets

New home sales came surging back this afternoon, with the figure well ahead of expectations, providing a standard around which equity bulls could rally.

The US is stepping up its military and diplomatic offensives in the Middle East but the initial shock has subsided, with markets once again displaying their relaxed attitude to geopolitical risk.

Blackberry shares have had a broadly positive reaction to the new smartphone and the company’s renewed focus on business clients – the ongoing turnaround programme benefited from the low expectations accorded the company, but this honeymoon period has come to an end and the CEO needs to keep the flow of new products and systems coming to keep  investors on side.

Precious metals lacking upside momentum

A drop in crude inventories gave a boost to US light crude during the afternoon, but the price was struggling to break through $92.

Brent was still suffering however, as the supply backdrop here continues to paint a much more bearish picture.

Precious metals continued to stabilise, but while they avoided further losses upside momentum was distinctly lacking. Yet more gains for the US 2-year yield point the way to additional downside in gold and silver, as the attraction of interest-bearing assets continues to shine more brightly than the idea of gold as a safe haven.

Further losses for pound and euro

Dollar bulls have taken hold in the afternoon session once again, leading to further losses for the pound and the euro. The resurgence of the US currency may take some by surprise, especially those that still believe the greenback was fatally weakened by the Federal Reserve’s QE programme, but the world’s reserve currency is evidently not finished yet.

The economic focus for the rest of the week switches broadly to the US, which should provide more ammunition for those looking to benefit from further gains in the US dollar. Bad data or good data, the US currency continues to carry all before it.  

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.