Can this recovery last?

The FTSE might have enjoyed a positive day at the end of the week but the net returns over the five days as a whole are still going to be negative.

Source: Bloomberg

We have not seen the same levels of frenetic trading as we saw on Thursday as the overly bearish sentiment has eased. The triggers that saw yesterday’s sell-off were on the most part fundamental and very few if any of those have changed, meaning that this bounce we are enjoying could easily disappear at the beginning of next week.

The mere mention of negative interest rates not that long ago was unthinkable, and following two days of testimony and questioning Janet Yellen has redrawn the lines of expectations. The current implied probability of a US interest rate rise in 2016 is now 94.8% of none at all.

The negative interest rate panic yesterday helped gold have its biggest one day rise in five years today it has given a lot back however crucially still holds above the $1232 level.

Oil's inability to make up its mind continues as vague rumours emanating from the UAE that an OPEC wide reduction in production levels might materialise has seen WTI jump by as much as it fell yesterday. Of course without this rumour being endorsed by Saudi Arabia it’s not worth more than a short-term bounce.

Rolls-Royce has done its bit to add to the FTSE bounce spending most of the day with its shares up by 15%. This maybe is more of a reflection of how low expectations were than anything else. Cutting its dividend for the first time in 24 years by 50%, but crucially after five profits warnings in a row it has managed to maintain its 2016 outlook.

Commerzebank had equally low expectations but a surprise return to profit with its fourth-quarter figures has helped inspire a little more confidence in European banks. Considering that the MSCI European Financial sector has fallen by 32% in the last six months this is no mean feat from Germany’s second-largest bank. Sentiment in the corporate arena appears to be not as bad as it was, but still not great.

FTSE risers and fallers


Company Index points % change
BP +15.73 +7.17
HSBC +15.32 +4.82
Royal Dutch Shell - A +12.84 +5.83
Royal Dutch Shell - B +7.58 +5.57
Prudential +6.97 +6.49


Company Index points % change
Imperial Brands -1.27 -0.95
Tesco -0.82 -1.45
BT Group -0.71 -0.49
Hikma Pharmaceuticals -0.13 -1.33
TUI AG -0.02 -0.1


With China back from its week long New Year celebrations these are the important economic and corporate highlights for the week ahead.

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.