Downbeat start to a quieter week

In mid-morning trading, the FTSE 100 is 30 points lower, as markets struggle for momentum.

City of London aerial view
Source: Bloomberg

A shortened week for US markets and a lighter economic calendar has left markets floundering for direction. A weak open in Europe, where traders arrived at their desks after a weekend of fresh security alerts, was somewhat nullified by the ongoing anticipation that the European Central Bank is planning to unleash more easing on the eurozone.

History teaches us that indices tend to rise in the week leading up to Thanksgiving, as US traders look forward to their seasonal feast, so stock market bears may find it hard to gain any real traction in coming sessions.

Home Retail Group is enjoying a lift this morning, after weekend speculation that the firm may be the subject of a bid. While the cheapness argument  always has some adherents, the lesson we have re-learned from Glencore of late is that things can go on getting cheaper. Nonetheless, with UK consumer spending holding up well, a bid may well prove to be a sensible move in the longer-term.

The prime minister’s defence review has been somewhat upset by recent events, but this has proven to be good news for BAE Systems and Rolls-Royce, which have risen today on expectations that the UK will boost its armed forces to help cover the twin problems of a resurgent Russia and fresh terror threats.

US existing home sales are the main event for the afternoon, and with little on the corporate front US markets may well open in similar fashion to their European counterparts. Having recovered plenty of lost ground in recent sessions, the question is now whether bulls can muster enough energy to extend the rally into a second week.

Ahead of the open, we expect the Dow Jones to start at 17,811, down 12 points from Friday’s close.

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