Equity markets struggle as momentum runs out

The FTSE 100, along with the rest of Europe, has seen confidence steadily chipped away as screens have turned red across city trading floors. 

City of London
Source: Bloomberg

Regulators hit banks with hefty fines

Ornithologists were in a flap today as circling the City the usual flocks of hawks and doves were seen, but nestled in the middle was a lesser-spotted Canadian Loon. As has now become the norm, the Bank of England’s Q&A session revolved around analysts trying to pin down Mark Carney for a start date to interest rate rises while he demonstrated his ever-improving footwork by dodging these questions.

Currency traders around the City will have been sitting a little less comfortably this morning, as confirmation of £2 billion worth of fines from both US and UK regulators hitting both HSBC and RBS in the FTSE were confirmed. The regulatory bodies have confirmed this is just the start, as they will now be moving their investigation on to pinpoint not just the companies but the individual traders responsible for the transgressions.

Although not in the same grandiose scale, Sainsbury’s has followed in Tesco’s footsteps with its own falling profits and impairment charges. Promises of cost-cutting exercises have not been able to prevent the markets from punishing the food retailer’s share price.

The Beckham’s are the latest iconic show ponies in Burberry CEO Christopher Bailey’s stable, and have helped contribute to the 6% rise in the company’s pre-tax profits. This, however, has not been enough to inspire the equity markets that have been more focused on the problems of wobbling Asian demand.  

US markets in overbought territory

Following on from yesterday’s record-setting highs in both the S&P 500 and the Dow Jones, US equity traders are a little more cautious with their optimism today. The recent run in US equities has seen all the major indices move into overbought territory and momentum peter out.

Iconic US retailer Macy's has posted a 23% increase in its third-quarter earnings and given further credence to the belief that consumer confidence in the US is buoyant.

Cisco Systems is also set to report improving figures after the US markets close tonight.

Brent unlikely to stay in $80 region

Brent crude’s ability to stay in the $80 region is looking increasingly less certain. OPEC’s latest meeting is still a couple of weeks away, and all of the sound bites we have heard from oil ministers have given hints that current supply levels are likely to remain unchanged for the time being.

USD/JPY slides from seven-year highs

Speculation that the Japanese parliament was going to be dissolved because of bitter disagreements over the new sales tax increases has seen USD/JPY slide off its seven-year highs. Japanese Prime Minister Shinzo Abe’s grip on control looks less than secure and further volatility looks inevitable.

Further GBP/USD weakness was seen today, but the Bank of England’s inflation report appeared to be much ado about nothing. Even after a jovial Q&A session from BoE governor Mark Carney the currency markets are still factoring in interest rate rises in the second half of 2015.

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