Bullish FTSE eyes 7000

Better-than-expected manufacturing figures have helped push the FTSE higher by 25 points as traders start the new month off on a bullish note. 

City of London
Source: Bloomberg

China has done its best to start the week off on a positive note with its slightly better-than-expected manufacturing figures and the Chinese central bank’s decision to cut interest rates by 25 basis points. This cut sees China reduce interest rates down to 5.35% and become the seventeenth nation to cut rates this year. Expectations are also high that Australia will cut its rates again tomorrow. However, somewhat less cheerily, this action does point towards the Asian powerhouse cutting its growth rate outlook down to 7% for the year ahead.

Although pre-market calls had pointed to a soft open, the FTSE has quickly shaken off this malaise and again looks to be threatening the 7000 level.

IAG’s CEO Willie Walsh will try one more time to convince the Irish government to sell its 25% stake in Aer Lingus and that he is a safe pair of hands.

The complicated asset and cash swap proposal between pharmaceutical giants GlaxoSmithKline and Novartis looks to have been completed, with the return of up to £4 billion to GSK shareholders sure to leave a smile on the faces of at least one set of participants.

Chocolatier Thornton’s has underwhelmed the markets with its first-half figures this morning. Considering that Christmas and December sales had been up by 7.8%, the 9.7% fall in pre-tax profits has seen expectations melt away.

The mining and banking sectors in the FTSE have helped drag the equity index to within touching distance of the mystical 7000 level. In recent years they have frequently been blamed for hampering the FTSE’s efforts in climbing higher, but both Barclays and RBS are at present leading from the front.

US equity markets paired back some of their recent runs as they closed out last week on a softer note, but with the bullish start to the European markets setting the tone for the new month, pre-market calls are for a return to the more optimistic mindset frequently associated with the US.

After seeing both China and the UK overshoot manufacturing expectations, this template looks like it will be replicated this afternoon by the US rather than the lacklustre eurozone equivalent. Ahead of the open we expect the Dow Jones to start 38 points higher.

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